NSW subcontractors cash retention trust scheme proposed for construction company collapses

A cash retention trust scheme is scheduled to protect New South Wales sub-contractors in the event of a large construction company collapses in response to the Collins Inquiry.

The NSW Fair Trading Minister, Matthew Mason-Cox announced the retention trust proposal as the first of its kind in Australia.

"NSW will become the first state to protect payments for subcontractors by requiring construction companies to hold retention money in a trust fund," Mason-Cox said.

“Head contractors will be responsible for holding retention money in their own accounts, and NSW Fair Trading will be checking audit reports that require head contractors to show they are keeping trust accounts as required.

“This will end the widespread industry practice of using subcontractors’ trust money for the head contractor’s working capital purposes."

NSW Fair Trading has released a draft regulation and regulatory impact statement, which is now open for public consultation.

The scheme will initially apply to head contractors and their direct subcontractors for projects valued of $20 million plus.

The NSW government would commence a full review of the Security of Payment Act in 2015, which would be an opportunity for a comprehensive revision of security of payment laws.

The $40 billion construction industry in NSW was a major contributor to employment and growth in this state, Mason-Cox said.