The Regulation commenced on 1 May and only applies to construction contracts entered into after that date with a value greater than $20 million. The value is determined by the stated contract price or where no amount is stated, the market value of the work carried out and the goods and services supplied.
Under the changes, head contractors:
1. must keep retention money separate in an account with an authorised deposit taking
2. ensure that the name of the account includes the head contractor’s name and the
words ‘trust account’;
3. must notify the ADI in writing that the account is a retention money trust account for the
purposes of the Regulation;
4. must within 14 days of opening the account supply the Chief Executive of NSW Fair
Trading the details of the account;
5. can only withdraw money from the account by EFT or cheque and in accordance with
the terms of the contract, as agreed in writing with the subcontractor or in accordance
with an order of a court or tribunal;
6. must notify the Chief Executive of Fair Trading within 5 days of the account being
overdrawn and the reasons for the account being overdrawn;
7. must provide an account review report obtained from a registered company auditor
which certifies compliance with the Regulation within 3 months of each financial year;
8. must pay an administrative fee of $1,500 at the time of submitting the account review
Head contractors who fail to comply with the new changes will face fines of up to $22,000.
NSW Fair Trading has indicated that it is commencing a full review of the Building and Construction Industry Security of Payment Act (NSW) 1999 during 2015, and as part of this review will consider whether to extend the new regime to smaller value contracts.
Need more information on the operation of the Building and Construction Industry Security of Payment Act (NSW) 1999 or on construction contracts and other project documentation generally? Contact Kells on (02) 4221 9311.