The recently promulgated Building and Construction Industry Security of Payment Amendment (Retention Money Trust Account) Regulation 2015 (made under the Building and Construction Industry Security of Payment Act 1999 (NSW) requires head contractors under construction contracts with a project value of at least $20 million to hold retention moneys in trust for subcontractors from whom the money has been retained. Construction contracts are valued by reference to the amount of consideration payable under the contract for construction work carried out under the contract or for related goods and services supplied under the contract. The value includes variations so that a contract value can increase and reach the $20 million threshold after the contract has commenced, but only with regard to construction contracts between the head contractor and subcontractors entered into after the value of the project has reached the $20 million threshold. Where the contract does not expressly stipulate the consideration payable, reference will be had to the market value of the work and goods and services.
The money must be held in a trust account established with an authorised deposit-taking institution; an ADI, approved under s87 of the Property, Stock and Business Agents Act 2002 (NSW). The Chief Executive of the Office of Finance and Services must be notified within 14 days after a head contractor establishes a retention money trust account with an approved ADI; similarly, the Chief Executive must be notified when the account is closed. The Chief Executive is empowered to require specific information, for example the value of a contract or the value of retention moneys.
Money can only be withdrawn by cheque or EFT and only for the purpose of paying subcontractors in accordance with the terms of the contract, as agreed in writing by the head contractor and subcontractor or in accordance with a court or tribunal order.
Construction contracts can specify how interest on retention moneys is to be distributed, otherwise interest is held on the same trust as the retention money.
Head contractors must keep records which show the amounts deposited into or withdrawn from the account.
Head contractors must provide account review reports including a retention account statement to the Chief Executive within 3 months after the end of each financial year and pay a fee of $1,500. A pro forma annual report and statement is set out in the Regulation.
Contravention of these requirements including a general prohibition against providing false or misleading information to the Chief Executive are offences under the Act.