Security of payment in Australia
Statutory trust frameworks in Australian construction
Australian governments have spent more than a decade legislating toward one idea: money raised for a construction project should stay identifiable to that project. This is a plain-English guide to how statutory trust frameworks work, where they apply, what they deliberately leave untouched, and how project-level payment governance sits alongside them.
The short answer
A statutory trust framework is legislation that requires certain construction money — most often retention money, and in Queensland also progress payments on eligible contracts — to be held on trust in a designated account for the benefit of the parties entitled to it, rather than mixed with a business's general funds.
Coverage is deliberately partial. It is set by state, by contract value, by contract type and by the layer of the contracting chain. Statutory trusts govern where money sits. They do not, on their own, govern how a claim is verified, how an approval is recorded, or how a release decision is evidenced.
The structural problem
Construction money moves through more hands than most industries — and loses its identity along the way
A single residential or commercial build can involve a principal or homeowner, a financier, a head contractor, dozens of subcontractors, and hundreds of supplier transactions. Money enters at the top of that chain and is expected to reach the bottom, in the right order, against work that has actually been done.
The difficulty is structural rather than moral. Under conventional arrangements, once a progress payment lands in a general business account it becomes indistinguishable from every other dollar in that account. It is no longer this project's money; it is simply funds. From that point, the connection between a payment and the obligation it was raised to satisfy is maintained by record-keeping and goodwill rather than by structure.
This is not a failing of builders. Well-run Australian construction businesses manage this every day, often carrying significant administrative burden to do so. The point is that the payment system asks them to hold that connection manually, and gives every other participant very little visibility into whether it is holding.
Australian parliaments reached broadly the same conclusion. The response has been a series of statutory trust frameworks designed to keep defined categories of construction money separately identifiable.
Definitions
The four terms that cause most of the confusion
These terms are frequently used interchangeably in industry conversation. They mean different things, and the differences determine what protection actually applies to a given project.
- Statutory trust
- A trust created by legislation rather than by agreement between the parties. The obligation to hold money on trust arises because a statute says so, and applies whether or not the contract mentions it. Australian construction statutory trusts are typically imposed on the party holding the money — most often a head contractor — for the benefit of those entitled to be paid from it.
- Project trust account
- An account, opened for a specific eligible contract, through which progress payments to subcontractors are required to pass. Queensland's Building Industry Fairness (Security of Payment) Act 2017 is the clearest Australian example of this model. The account is project-specific, which is precisely the feature that distinguishes it from general business banking.
- Retention trust account
- An account holding retention money — the percentage withheld from a subcontractor's payments as security for defects and performance — on trust rather than as part of the holder's working funds. Retention trust obligations are the most widely adopted form of statutory trust in Australia and appear, in different forms, in Queensland, New South Wales and Western Australia.
- Security of payment legislation
- A separate and broader body of law, in force in every Australian state and territory, that gives contractors a statutory right to claim progress payments and a rapid adjudication process to resolve disputed claims. Security of payment legislation establishes entitlement. Statutory trusts address custody. The two work together but answer different questions.
For the national picture of claiming and adjudication rights, see our overview of security of payment in Australia.
The insight
Legislators did not set out to control cash flow. They set out to protect obligation flow.
Every Australian statutory trust framework rests on the same premise: certain construction money is not free capital. It is money already attached to an obligation that has not yet been discharged.
Retention money is the plainest illustration. It is withheld from a subcontractor, but it remains the subcontractor's money, held against a future condition. Treating it as general working funds disconnects it from the obligation that gave rise to it. A statutory trust reconnects the two by changing where the money sits.
That is the same principle PayLocker applies at project level: construction payment is not simply cash flow, it is obligation flow. Where legislation reconnects money to obligation for defined categories of funds, project payment governance can extend the same discipline across the whole payment pathway — by agreement between the parties, on any project, at any contract value.
State by state
How statutory trust frameworks differ across Australia
There is no single national statutory trust regime. Each state has legislated separately, at different times and to different depths. The practical effect is that the same builder, doing the same work, can face materially different trust obligations depending on where the project sits.
| Jurisdiction | Principal framework | Trust model | What it primarily addresses |
|---|---|---|---|
| Queensland | Building Industry Fairness (Security of Payment) Act 2017, administered by the QBCC | The most developed model in Australia: project trust accounts for progress payments on eligible contracts, plus retention trust accounts | Both custody of progress payments and custody of retention money, on contracts that meet the eligibility and value criteria. Further extension to lower-value private contracts was paused in January 2025. |
| New South Wales | Building and Construction Industry Security of Payment Act 1999, with Building Commission NSW oversight | Retention money trust account scheme for head contractors on contracts at or above a legislated value threshold | Custody of retention money at the head contract layer, supported by record-keeping and reporting obligations. Broader reform of payment protections remains under active consideration. |
| Western Australia | Building and Construction Industry (Security of Payment) Act 2021 | A retention money trust scheme introduced in stages, applying to contracts above defined values | Custody of retention money, with the deemed trust concept applied so that retention is held for the benefit of the party it was withheld from. |
| Victoria | Building and Construction Industry Security of Payment Act 2002 and the Domestic Building Contracts Act 1995 | No general statutory trust regime for construction payments | Payment protection is approached through claiming and adjudication rights, and through deposit and progress payment limits on domestic building contracts. |
| South Australia | Building and Construction Industry Security of Payment Act 2009 | No general statutory trust regime | Statutory entitlement to progress payments and access to adjudication, without a corresponding custody framework. |
| ACT, Tasmania and the NT | Territory and state security of payment legislation | No general statutory trust regime | Claiming and adjudication rights, with custody of project funds left to contract and ordinary business practice. |
Detailed state references are being built out at Queensland, New South Wales, Western Australia and Victoria.
Original framework
The four coverage gaps every project should understand
Statutory trusts do exactly what they were designed to do. The issue for most projects is not that the frameworks are weak, but that they were never intended to cover the whole payment pathway. Four gaps recur across every jurisdiction.
The threshold gap
Trust obligations attach above defined contract values. The great majority of Australian construction work — residential builds, renovations, fit-outs, smaller commercial projects — sits below those thresholds and is not captured at all.
The category gap
Outside Queensland's project trust model, statutory trusts largely address retention money. The far larger flow — progress payments themselves, and payments to suppliers for materials — is generally left to contract and ordinary practice.
The depth gap
Obligations typically attach at the head contract layer. Protection thins as work is subcontracted down the chain, which is precisely where payment uncertainty is most often felt.
The evidence gap
This is the least discussed and arguably the most consequential. A statutory trust governs where money is held. It does not create a structured, shared record of how a claim was assessed, who approved it, what progress it was assessed against, or why a release was made. Custody and evidence are different problems, and only one of them is legislated.
Original framework
Where payment governance sits in the construction stack
Statutory trusts, construction contracts and payment governance are often discussed as alternatives. They are not. They are separate layers, each doing work the others cannot. The PayLocker Payment Integrity Layer model sets them out in order.
Security of payment legislation and statutory trust frameworks. Establishes minimum rights and, in some jurisdictions, minimum custody obligations. Applies whether or not the parties want it to. Nothing operates above this layer and nothing replaces it.
The building contract and subcontracts. Defines scope, stages, claim mechanisms, approval rights, retention and dispute pathways. Determines what is owed and when — but a contract is a set of promises, not an operating system for carrying them out.
The operational layer that carries the contract into practice: project-linked funds, claims recorded against approved progress, approvals captured as distinct visible steps, controlled release against approved obligations, and a shared record every entitled participant can see. This layer is designed to complement the statutory and contractual layers, not to substitute for either.
Programme, site supervision, quality, safety and construction management systems. Determines whether the work that payment is claimed against has actually been performed.
Reading the model: each layer depends on the one above it. Legislation without operational governance relies on the parties to carry it out correctly. Operational governance without legislation has no floor. The two are strongest together.
Working out how a statutory trust affects your project?
We can walk through how project payment governance operates alongside the framework that applies in your state — for builders, developers, financiers and government bodies alike.
In practice
How project payment governance operates alongside a statutory trust
PayLocker does not administer statutory trusts and does not alter any obligation imposed by legislation. It applies the same underlying principle — money staying connected to the obligation it was raised for — as an operating structure agreed between the parties on a project.
The project is set up with its participants verified
The project, its stages and its participants are established up front, so every later payment decision has a defined structure to sit within.
Funds are held in a project-specific account
Payments arrive into an account connected to that project rather than into general operating funds. This mirrors the separation principle that statutory trusts apply to defined categories of money, and extends it by agreement to the project as a whole.
Claims are made against approved progress
Contractors and suppliers submit claims against the work and stages already defined, rather than into an unstructured approval process. The claim carries its own context.
Approval is recorded as a distinct step
Who approved what, and when, is captured as a visible event rather than reconstructed later from email. This directly addresses the evidence gap that statutory trusts were never designed to close.
Release follows the approved obligation
Where funds are available and an obligation has been approved, the entitled participant is paid in the approved sequence — and the decision is recorded alongside the approval that authorised it.
The record stays visible to the parties
A shared view of claims, approvals and releases gives each participant evidence of payment discipline on their own project — useful in contract administration, in financier reporting and in demonstrating governance to a principal or homeowner.
A fuller walkthrough of the pathway is set out on How PayLocker works.
Position
Being precise about what PayLocker is in a statutory context
This distinction matters most to the readers who assess these questions professionally: regulators, financiers, principals and legal advisers. It is set out plainly.
PayLocker is
- Construction payment integrity infrastructure
- A project payment governance platform
- A structured payment environment agreed between project participants
- A governed payment workflow, from claim through approval to release
- A source of shared payment records and visibility for entitled participants
- Designed to complement statutory frameworks and construction contracts
PayLocker is not
- A statutory trust, or an administrator of one
- A bank, an insurer or a regulator
- A substitute for security of payment legislation or any statutory obligation
- A replacement for the construction contract
- A replacement for builders, project managers or construction management systems
- A guarantee of payment, of project completion, or against project failure
Where a statutory trust obligation applies to a project, that obligation continues to apply and must be complied with. Parties should obtain their own legal advice on how any statutory framework applies to their circumstances.
Common questions
Statutory trusts, answered plainly
A statutory trust is a trust created by legislation rather than by agreement. In Australian construction, it requires a party holding certain money — commonly retention money, and in Queensland also progress payments on eligible contracts — to hold that money in a designated trust account for the benefit of those entitled to it, separately from general business funds.
Queensland, New South Wales and Western Australia each operate statutory trust arrangements, though of different scope. Queensland's framework is the broadest, covering both project trust accounts and retention trust accounts on eligible contracts. New South Wales and Western Australia focus on retention money. Victoria, South Australia, the ACT, Tasmania and the Northern Territory do not currently operate a general statutory trust regime for construction payments.
A project trust account is used for progress payments to subcontractors on an eligible contract, so that project payments pass through an account tied to that project. A retention trust account holds retention money — the amounts withheld as security for defects and performance — on trust for the party it was withheld from. A single project can involve both.
It depends on the state, the value of the contract, the type of contract and, in some cases, whether the principal is a government body. Because thresholds and staging change, the only reliable answer comes from the current legislation and the relevant regulator, together with your own legal advice. Most Australian construction work by volume sits below the applicable thresholds.
No. Security of payment legislation, which exists in every state and territory, creates a right to claim progress payments and a rapid adjudication process for disputes. Statutory trusts deal with how money is held. Entitlement and custody are different questions, and a project can have strong rights under one and no protection under the other.
They are designed to improve protection for subcontractors whose money is held further up the chain, particularly retention money. Protection generally attaches at the head contract layer and thins further down the chain. Payments to suppliers for materials sit outside statutory trust frameworks in all states.
No. PayLocker is a construction payment governance platform. It is not a statutory trust, does not administer statutory trusts, and does not replace any obligation created by legislation. Where a statutory trust applies to a project, that obligation continues to apply.
PayLocker is designed to operate alongside statutory frameworks rather than in place of them, focusing on the claim, approval, release and record pathway that legislation does not address. How that works on a particular project depends on the contract and on the statutory obligations that apply, so it is worth discussing the specifics with us and with your legal adviser.
No framework can do that, and none claims to. Statutory trusts are designed to keep defined categories of money separately identifiable so that it remains connected to the parties entitled to it. That improves discipline and visibility around payment. It does not address programme, weather, design, market conditions or the many other factors that affect a construction project.
Because separation is structural and record-keeping is discretionary. Once money is mixed into a general account it is no longer identifiable as belonging to a particular project or party, regardless of how carefully it is recorded. Holding it separately preserves that identity in the account itself.
Account establishment, reconciliation and reporting obligations do create administrative work, which is one reason staged implementation has been used. Structured payment systems can help reduce that burden by handling the sequencing and record-keeping that would otherwise be done manually, which is a benefit to builders as much as to anyone else in the chain.
Mainly that statutory trust protections are unlikely to apply to a typical residential build, because those frameworks are aimed at larger contracts further up the chain. The principle behind them, however — that project money should stay connected to the project — can still be applied to a home build by agreement between the homeowner and the builder.
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Related pages
Construction has systems for contracts, finance and delivery. Payment deserves the same structure.
PayLocker keeps construction money connected to the project.
Statutory trust frameworks show where Australian policy is heading: money raised for a project should remain identifiable to that project. Those frameworks reach part of the industry, by design. Project payment governance can extend the same discipline to the rest of it — by agreement, on any project, at any contract value.
If you are assessing how payment governance would work on your project, or how it sits alongside the statutory framework in your state, we are happy to talk it through.