Retention requirements

The Queensland Building and Construction Commission Act 1991 (QBCC Act) specifies requirements for retention monies on building contracts.

Changes around retentions and securities withheld under a contract and defects liability periods were introduced in December 2018 to protect the rights of contractors where a retention is withheld.

See more details in Part 4A of the QBCC Act and on the Queensland Building and Construction Commission website – Retentions and securities.

Penalty for not releasing retention amounts

A maximum penalty of 200 penalty units or 1 year’s imprisonment may apply for failing to release a retention amount to the contracted party in accordance with the contract without a reasonable excuse.

This penalty also applies to the failure to release other securities, such as a bank guarantee.

Retention trust account

The Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) specifies the requirements for establishing a retention trust account.

A retention trust account is required to hold cash retentions withheld under a contract (where a project trust applies) until they are due to be paid.

The retention amounts are withheld in trust for the benefit of contracted parties (e.g. subcontractors) and the trustee.

The requirement for a retention trust account applies only to principals (excluding government bodies and state authorities) and head contractors.

Each trustee requires only 1 retention trust account, and this 1 account may hold cash retention amounts across multiple projects.

Read more about retention trust accounts.