Key Takeaways
• Retention money held by a QBCC-licensed contractor must be kept in a separate trust account under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) — it is not available to the contractor’s liquidator.
• Subcontractors and sub-subcontractors can make a direct claim against the retention money trust even after the head contractor enters liquidation.
• The claim window is short — you must act before trust funds are disbursed or the trust is wound up by the liquidator or QBCC.
• If no retention trust account exists (in breach of the BIF Act), you may still lodge a proof of debt and pursue a QBCC complaint against the licence holder.
• Boss Lawyers acts for subcontractors in exactly these situations. Call 1300 267 711 for urgent advice.
What Is QBCC Retention Money and Why Does It Matter?
When a subcontractor completes work on a Queensland building project, the head contractor typically withholds a percentage of each progress payment — usually 5% to 10% — as security against defects. This is called retention money.
Under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act), certain QBCC-licensed contractors are required to hold that retention money in a dedicated retention trust account (RTA). The purpose of this requirement is straightforward: retention money belongs to the subcontractor until it is legitimately called upon. It should never be mixed with the contractor’s operating funds.
The problem is that many head contractors do not comply. And when the contractor enters liquidation, subcontractors often discover — too late — that their retention money was never held separately. At that point, it may be gone.
This guide explains your rights, the trust framework, and exactly what to do if your head contractor has just collapsed.
Who Must Hold Retention Money in Trust?
Under Part 4A of the BIF Act, the obligation to hold retention money in trust applies to project trust account users — that is, QBCC-licensed contractors who are parties to a “project trust contract.”
A project trust contract is a contract for building work where:
- The contract value is $1 million or more (for private sector work), or $1 million or more (for government work); and
- The head contractor holds a QBCC licence for the work.
If these thresholds are met, the head contractor must:
- Open a project trust account for the project at an authorised financial institution;
- Open a retention trust account (RTA) to hold all retention money withheld from subcontractors; and
- Keep the RTA funds entirely separate from operating accounts — it is not the contractor’s money.
The retention trust obligation applies to retention withheld from both first-tier subcontractors and sub-subcontractors (through a cascading obligation).
What Happens to QBCC Retention Money When a Contractor Goes Into Liquidation?
Here is the critical legal point: money held in a properly constituted retention trust account is not property of the contractor. It is held on trust for the subcontractors.
When a company enters liquidation, the liquidator takes control of the company’s property. But trust property — including funds in a properly maintained RTA — is excluded from the liquidator’s pool of assets. Section 553C of the Corporations Act 2001 (Cth) and the express trust terms of the BIF Act make this clear.
In practical terms, this means:
- If the RTA was properly maintained, the funds should be available to the subcontractors who lodged retention claims — not distributed to unsecured creditors generally.
- The QBCC has monitoring and enforcement powers over the RTA. Subcontractors can lodge a complaint with the QBCC if the head contractor has failed to maintain the trust properly.
- The liquidator has specific obligations to identify and deal with trust property separately from the company’s own assets.
How to Make a Claim Against Retention Money in Liquidation
If your head contractor has entered liquidation and you have retention money withheld, follow these steps immediately:
Step 1 — Identify Whether an RTA Exists
Contact the liquidator as soon as possible and ask specifically whether the company maintained a retention trust account, and if so, which financial institution holds it. If the liquidator does not know, this is itself a problem — the QBCC can investigate.
Step 2 — Lodge a Proof of Debt AND a Trust Claim
Lodge a proof of debt with the liquidator for all outstanding amounts, including your retention money. This preserves your position as a creditor if trust funds are insufficient or if no RTA exists.
Additionally, write to the liquidator expressly asserting your claim to the retention money as trust property — not simply as a debt. Include your contract, payment schedules, and the specific retention amounts withheld under each progress payment.
Step 3 — Lodge a Complaint With the QBCC
If the contractor held a QBCC licence and was required to maintain an RTA, the QBCC has powers to investigate compliance under Part 4A of the BIF Act. Lodge a complaint with the QBCC identifying the project, the head contractor’s licence number, and the retention amounts at issue.
The QBCC can direct the financial institution holding the RTA to freeze funds pending resolution. This is one of the most powerful levers available to subcontractors in this situation.
Step 4 — Act Before Funds Are Disbursed
Trust funds in an RTA should only be released to a subcontractor once their entitlement has been established and the defects liability period has passed (or retention is otherwise due). A liquidator who disburses RTA funds in breach of the trust terms may be personally liable.
However, if you delay, there is a risk that another subcontractor moves first, or that the liquidator makes a mistake and distributes the funds. Act immediately.
What If No Retention Trust Account Exists?
If the head contractor was required to hold an RTA and failed to do so, they have breached the BIF Act. This is a serious offence under section 59M of the BIF Act, carrying substantial penalties. It also gives rise to:
- A QBCC complaint against the contractor’s licence (which can result in licence cancellation or suspension);
- A potential unfair preference claim by the liquidator against parties who received trust money before the liquidation if those funds were commingled;
- Your position as an unsecured creditor for the full retention amount — lodge a proof of debt.
The absence of an RTA does not extinguish your claim. It changes the forum and the strategy. Get legal advice immediately.
QBCC Retention Money and the Queensland Construction Sector in 2026
Construction insolvencies remain at near-record levels in Australia. According to ASIC data, the construction sector accounts for approximately 27% of all corporate insolvencies in Australia, with Queensland particularly affected by project delays, labour costs, and fixed-price contract pressures.
The BIF Act retention trust regime was specifically designed to protect subcontractors in exactly this scenario. But it only works if the head contractor complied — and if subcontractors know to pursue their trust claim quickly.
At Boss Lawyers, we regularly act for subcontractors and creditors in construction insolvency matters across Queensland. We know the liquidation process, the BIF Act trust provisions, and the QBCC enforcement mechanisms. If your head contractor has just entered liquidation and you have retention money at risk, call us now on 1300 267 711.
Frequently Asked Questions
Is retention money protected if my head contractor goes into liquidation in Queensland?
If the head contractor was required to hold retention money in a retention trust account (RTA) under the BIF Act and did so correctly, those funds are held on trust and are not available to the liquidator for distribution to general creditors. You should lodge both a proof of debt and a specific trust claim with the liquidator, and notify the QBCC immediately.
What is a retention trust account under the QBCC Act?
A retention trust account (RTA) is a dedicated bank account that QBCC-licensed contractors must maintain to hold retention money withheld from subcontractors, as required by Part 4A of the Building Industry Fairness (Security of Payment) Act 2017 (Qld). The funds in an RTA are held on trust for the subcontractors — they belong to the subcontractor, not the head contractor.
What if the contractor did not set up a retention trust account?
Failure to maintain an RTA is a breach of the BIF Act and should be reported to the QBCC. You would also lodge a proof of debt with the liquidator as an unsecured creditor for the full retention amount. Seek legal advice promptly — recovery options depend on the specific circumstances of the collapse and the state of the company’s assets.
How long do I have to make a claim against retention money?
There is no fixed statutory deadline for lodging a trust claim, but urgency is critical. Liquidators work quickly and trust funds can be misallocated. Lodge your claim with the liquidator and the QBCC as soon as you become aware of the liquidation — ideally within days, not weeks.
Can a sub-subcontractor (second-tier subcontractor) also claim retention money?
Yes. The BIF Act imposes cascading trust obligations. First-tier subcontractors who hold QBCC licences and are parties to project trust contracts must also hold retention money withheld from second-tier subcontractors in a separate RTA. If you are a sub-subcontractor, you may have a direct trust claim.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
