Subbies United says State Government delay of project trust accounts will cost businesses

Subcontractor support groups say a State Government decision has condemned scores of small and medium construction businesses to collapse. Find out why

Subcontractor support groups say a State Government decision to delay implementation of project trust accounts has condemned scores of small and medium construction businesses to collapse.

Laws were brought in more than five years ago requiring builders to set up a designated trust account to protect subcontractor payments for every building project over $1m.

However, the State last week announced full implementation of the new laws wouldn’t take effect until October 2025, leaving subcontractors exposed in the event of a builder collapse.

John Goddard, founder of support group Subbies United, said the delay meant another two years of tradies potentially losing months of progress payments every time a builder went under.

As well as leaving invoices unpaid, a builder liquidation also dissolves subcontractor retentions – a portion of progress payments withheld by the builder, ostensibly to cover it if the work is defective.

Yet another national builder, Porter Davis Homes, went into liquidation on Friday, leaving untold debts to subbies and suppliers.

Work has been delayed on the Shoreline tower at Surfers Paradise since PBS Building went into administration in early March. Picture: Glenn Hampson

Mr Goddard said, without trust accounts, money meant for subcontractor progress payments and retentions was routinely used by building companies as cash flow.

“Without project trust accounts, builders will continue to use our money, they’ll go broke and our money will be gone and so will the retentions,” he said.

‘That’s what the government has done.”

As they usually front the costs of labour and materials for construction jobs, subcontractors are essentially unsecured, interest-free lenders for developments, taking on much of the financial risk and adding value to the overall project, at the benefit of the builder and developer.

Project trust accounts are a mechanism to secure that value for subcontractors in the event of a liquidation.

Condev owed more than $60m when it collapsed, with the bulk of debts owed to subcontractors. Picture: Nigel Hallett

Announcing the delay, Public Works and Procurement Minister Mick de Brenni blamed “software providers” that “haven’t kept pace with industry reform and need time to catch up”.

However John Goddard, of support group Subbies United, said subbies were not buying that explanation.

“Software for use by law firms and real estate agents to manage their trust accounts has been in use for decades,” he said.

“Given the strict regimen imposed on those professions we can only assume that the software is fit for purpose.”

Mr Goddard said builders would still benefit from the interest held on the accounts, which would likely go a long way to offsetting the costs of operating them.

The accounts have been strongly opposed by peak building bodies including the Master Builders Association, which argues their implementation places too high a cost on small building businesses.

In a statement, Master Builders Queensland welcomed the delay, saying the accounts would have added “more red tape and extra costs to do business in the current climate” and “could push some over the edge”.