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Security of payment reform for Queensland to help subbies get paid

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Security of payment queensland blog post b
Posted by Sophia Rostron

The Queensland Government has released a Security of Payment discussion paper to seek comments and suggestions from industry and the community on how best to tackle this issue for subcontractors. During the next month or so, the Government is meeting with Queenslanders at consultation sessions all around the State to hear what they think. Learn more about the wide-ranging legislation that could impose significant changes to the administration of construction contracts.

What is the "security of payment"? What are the problems?

Security of payment in the construction industry is about making sure everyone in the contractual chain gets paid for work done or goods supplied by a subcontractor. Subcontractors are particularly vulnerable because they are generally further down the payment chain.

The topic is very important to the construction industry - it's about making sure subcontractors get paid on time, every time. This is not just important for workers and their families, it is important for Queensland’s economy and productivity.

The current laws do not adequately address:

  • insolvency in the contractual chain
  • retention money being used as cash flow
  • delays in payment
  • challenges with managing finances and business

The Queensland Government has released a Security of Payment discussion paper to seek comments and suggestions from industry and the community on how best to tackle this issue for subcontractors. During the next month or so, the Government is meeting with Queenslanders at consultation sessions all around the State to hear what they think.

Laws across Australia

Clayton Utz Insights report

Each State and Territory jurisdiction is looking to solve common concerns, but with differing approaches.

Western Australia and South Australia have already undertaken recent reviews of their SOP legislation which will likely see the introduction of provisions either unique to those States or the adoption and amendment of what exists elsewhere. NSW is also thinking about making further changes to its SOP scheme involving tweaks to the recent SOP reforms that flowed from the Collins Inquiry (NSW), but also more substantial changes, such as an ability for SOP claims to be made down the contractual chain. 

A co-ordinated effort by the Australian and State/Territory Governments to create a harmonised SOP framework would be a powerful tool for improving the security of payment for construction contracts in Australia, and would represent an opportunity for a national shift in measures directed towards the timely payment of contractors.

Queensland's options for reform

Option 1—Project Bank Accounts (PBA): Screen_Shot_2016-02-10_at_11.50.46_am.png

Everyone from the head contractor to all subcontractors get paid at the same time through a trust account. In this model, instead of a chain of payments that is vulnerable to insolvency, everyone gets paid from the PBA at the same time. The PBA safeguards progress payments and retention money.

   

Screen_Shot_2016-02-10_at_11.48.56_am.png

 

Option 2—Retention Trust Fund Scheme:

This option requires subcontractors’ retention money to be held in a separate trust account. In this model, the contractual chain of payments is used. Only retention money is safeguarded in a trust account. Progress payments are still subject to insolvency in the contractual chain. 



Option 3—Insurance schemes: This option includes a range of insurance schemes to safeguard against defects, late completion and insolvency of contractors.

Option 4—Federal legislative changes: This option seeks to lobby the Commonwealth government for reform to Commonwealth legislation relating to security of payment in the construction industry.

Option 5—Education: This option proposes education for the building and construction industry regarding matters such as financial management, contract management and protection of their rights.

Security of payment legislation across Australia

Have your say! 

To register, email securityofpayment@hpw.qld.gov.au with your name and the date and location of the session you will be attending. Registration is not mandatory, however, encouraged. 

Even if you can’t attend a consultation session you can still have your say, by visiting the Get Involved website. Submissions for this consultation closes 5pm, Thursday 31 March 2016.

Sophia Rostron

Sophia Rostron

As the Content editor at plantminer.com.au, Sophia works behind the scenes to keep our blog machine in motion. A student of Law and Business, she's very dependent on coffee and loves any excuse to travel.