Those that do not comply with the new rules will face hefty fines of up to $200,000, and company directors can also be personally liable. Photo: Unsplash / Abdul Zreika
Subcontractors say they will receive better protection from collapsed construction firms after a law change.
Under the new law, firms that hold retention money against subcontractors must regularly provide reports about the money.
Retention money is money that is held by a main contractor to ensure a subcontractor meets their contract, with the money then paid after the work is completed or after a warranty period.
Under the new law, firms must also hold the retention money on a trust in a separate bank account, which cannot be mixed with other company money.
Those that do not comply will face hefty fines of up to $200,000, and company directors can also be personally liable.
Master Plumbers chief executive Greg Wallace said under the outgoing law, it was difficult to check whether firms kept the retention money in a separate account.
He said the tough new fines for those that do not comply will also act as a deterrent.
"[Retentions] are normally the profit that subcontractors are making," Wallace said.
"We want to ensure that it's kept in a separate account and is paid and it can't be part of any other liquidation or other problems when the company does get into financial duress," he said.
He hoped the law change would avoid a repeat such as the significant retention money owed to subcontractors following the collapse of construction firm Mainzeal in 2013.
"This new legislation goes a long way to addressing issues that have left our subcontractors vulnerable to being significantly out of pocket. We applaud the government for acting," Wallace said.
Master Electricians chief executive Bernie McLaughlin said the law change was a "major win" for all subcontractors.
"We look forward to working with the government and other industry stakeholders to ensure the new legislation is implemented effectively and that subcontractors are able to benefit from the new protections," he said.
The new law comes into force in October.