Subcontracting for building services
Construction contracts over the value of $20,000 (including GST) with a building service contractor will be required to be made in writing and contain mandatory information. This includes subcontracts.
A “construction contract” means a contract, agreement or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party. This includes subcontracts, plant and material supply agreements, equipment hire and professional services contracts.
A “construction contract” and “construction work” are defined very broadly, meaning the Act applies to the vast majority of contracts entered into in the industry, including those for residential, commercial, infrastructure and engineering construction works.
The following mandatory information must be included in a written construction contract:
- Names of the parties in the construction contract;
- The registration number of the building service contractor;
- A general description of the construction work to be carried out or of the related goods and services to be supplied; and
- The amount to be paid for carrying out the construction work or supplying the related goods and services (or how that amount is to be calculated).
Failure by a registered building service contractor to meet these requirements will result in a maximum penalty of $2,000. It is important to note that if a contract does not contain all the mandatory information, it is still a valid contract.
A suggested form of contract for subcontracts between a registered building service provider and a subcontractor for the carrying out of a building service has been provided to assist you in meeting the above requirements.
Building and Energy cannot provide you with advice on this contract. If you are unsure about any of the terms of the contract, or how to fill out and execute the contract, please consider seeking your own independent advice such as from a construction contracts specialist or lawyer.
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Retention Trust Scheme
The retention trust scheme requires retention money withheld under eligible construction contracts to be held in a retention money trust account with a recognised financial institution.
Timeline for the requirements:
- After 1 February 2023 – Construction contracts over $1,000,000 (including GST) that require the holding of retention monies will be required to hold the funds in a retention trust account.
- From 1 February 2024 – Construction contracts over $20,000 (including GST) that require the holding of retention monies will be required to hold the funds in a retention trust account.
Contracts entered into before 1 February 2023 do not require retention money to be held in a trust account.
The guideline document below is written to assist current and future parties that are using, or will use, retention money as a method of performance security to understand their rights and obligations under the Retention Trust Scheme.
This guide provides information on:
- Determining whether a retention trust is required.
- How and when to open a retention trust account.
- How to operate a retention trust account.
- How to end a retention trust.
- The rights and obligations of the parties involved.
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Building Services Board powers and obligations
As of 1 February 2023, the Building Services Board (the Board) has powers to manage the commercial conduct and behaviour of building service providers.
The Board can take action against builders and other providers who fail to pay debts to subcontractors and to remove those with a history of financial failure.
Building service providers that are ‘bodies corporate’ are required to notify the Board in writing of the appointment of any new director within seven days of the director being appointed. – see the
Building and Energy has prepared the guide below to help you understand the upcoming changes. This guide should be read in conjunction with the other information about the Act available elsewhere on our website.
