A bill has been introduced to Parliament to make clear that the new retentions regime for construction contracts only applies to contracts which have been entered into, or renewed, on or after 31 March 2017. Once the regime comes into force, parties may agree that it applies to earlier contracts. The Regulatory Systems (Commercial Matters) Amendment Bill had its first reading on 18 October 2016.
The retentions regime comes into force on 31 March 2017. Principals and head contractors will be required to hold retention money on trust as cash or liquid assets that are readily converted into cash. The money does not need to be kept in a separate trust account, and can be commingled with other moneys. Retentions may only be used to remedy defects in the contract works, cannot be used for working capital, and must be paid no later than the date upon which the contractor’s obligations have been completed. The mechanics of the regime will be clarified in regulations, which have yet to be released.