Retention requirement changes

The Queensland Building and Construction Commission Act 1991 (QBCC Act) specifies requirements for retention monies.

Changes around retentions and securities withheld under a contract and defects liability periods were introduced to protect the rights of contractors where a retention is withheld. These changes commenced on 17 December 2018.

The requirements apply to:

  • all existing building contracts
  • any building contracts entered into from 17 December 2018.

See more details in Part 4A of the QBCC Act and on the Queensland Building and Construction Commission website—Defects liability period and retentions.

Penalty for not releasing retention amounts

A maximum penalty of 200 penalty units or 1 year’s imprisonment may apply for failing to release a retention amount to the contracted party in accordance to the contract without a reasonable excuse.

From 1 October 2020, this penalty also applies to the failure to release other securities, such as a bank guarantee.

Retention trust account

The Building Industry Fairness (Security of Payment) Act 2017 specifies the requirements for establishing a retention trust account.

A retention trust account is required to hold cash retentions withheld under a contract (where a project trust applies) until they are due to be paid. The retention amounts are withheld in trust for the benefit of subcontractors and the trustee.

The requirement for a retention trust account currently applies only to principals (excluding government bodies and state authorities) and head contractors. At full implementation, all parties in the contractual chain, where a project trust applies, must hold cash retentions in a retention trust account.

The following commencement timeframes apply for establishing retention trusts:

  • From 1 March 2021, the head contractor for the project trust contract who is withholding cash retentions from first-tier subcontractors must establish a retention trust account.
  • From 1 January 2022, the head contractor for the project trust contract who is withholding cash retentions from first-tier subcontractors and the private sector principal who is withholding cash retentions from the head contractor must establish a retention trust account
  • From 1 October 2025, a retention trust account will be required for any contracting party down the contractual chain for a project trust project where they hold cash retentions. This captures principals, head contractors and some subcontractors.

Each trustee requires only one retention trust account, and this one account may hold cash retention amount across multiple projects.

Read more about retention trust accounts.