Huge fines or jail time for Project Bank Account Breaches

By Michael Batch

13 February 2018

A failure to comply with the obligations prescribed in the BIF Act can result in huge fines or even jail time.

In the below table we summarise both the key obligations and the respective penalty.

To see if these penalties could potentially apply to you or your business, you can also read the other articles in our 3 part series:

With penalties, bear in mind that Corporations penalties are generally 5 times higher than penalties for individuals.

With penalties for corporations ranging from $31,536 to $315,375 for even fairly nominal breaches of the legislation, it’s time to get your shop in order well ahead of when the PBA changes are going to affect you.

Here are a few highlights that should get you thinking about how you’re going to manage compliance. As you’ll see, there’s a lot of form over substance penalties – getting simple things wrong like timing, naming and notices can result in massive penalties.

THE PBA ACCOUNT OPENING

Forgot to open a PBA at all? That’s a maximum fine of $315,375 for corporations, and just doing it late could result in the same.

Did you forget to include the words “trust account” in your PBA? Corporations can pay a max fine of $126,150 for that.

PRINCIPALS AND PBAS

Failing to give your principal the right PBA access and visibility could mean a fine of $25,230 ($126,150 for companies).

You’ll risk the same if you forget to tell the principal about opening the account within 10 business days of doing so.

FAILURES TO PAY AND PROCESS

Of course, while failing to do the paperwork correctly can get massive fines, obviously so can failing to administer the fund properly.

$126,150 is the maximum fine for failing to deposit principal’s payments into the PBA.

$189,225 is what you might get if you have improperly withdrawn funds from the PBA.

In all we suggest you take a look at the table below and pin it somewhere useful to remind you what’s coming.

FAILURE BY THE HEAD CONTRACTOR TO:	PENALTY:
Establish a PBA by opening the appropriate accounts, prescribed by the Act Clause 23(1) Building Industry Fairness (Security of Payment) Act 2017 (BIF Act).	Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075) Maximum penalty for corporation: $315,375
Establish a PBA 20 business days after the start date Clause 23 (7) BIF Act.	Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075) Maximum penalty for corporation: $315,375
Ensure deposits, withdrawals and transfers, from and between PBA are only made using online transfers and only using a payment instruction given to the institution. Clause 24(1) BIF Act	Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075) Maximum penalty for corporation: $315,375
Ensure principal can view: (a) Deposits and withdrawals to the PBA (b) Information relevant to payment instructions (c) Account payment records Clause 24(2) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Ensure the account’s name includes the words ‘trust account’ Clause 25 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Give the principal written notice within 10 days after either opening, closing or changing the name of a trust account: Clause 26 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Ensure that all payments from principal are deposited in the PBA (exceptions apply) Clause 27(2) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Upon a contravention of Clause 27(2) (ABOVE), deposit the amount into the PBA as soon as practicable Clause 27(4) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 2 years imprisonment Maximum penalty for corporation: $126,150
Prevent deposits into PBA for an improper purpose, not prescribed by the Act Clause 28 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Ensure all payments to the subcontractor are paid from the PBA Clause 29 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Cover any shortfall in the PBA Clause 30 BIF Act	Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) or 1 year imprisonment Maximum penalty for corporation: $63,075
Refrain from improper withdrawal from the PBA Clause 31(1) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment Maximum penalty for corporation: $189,225
Upon improper withdrawal, repay amounts withdrawn as soon as practicable Clause 31(2) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment Maximum penalty for corporation: $189,225
Comply with order of priority payment when there is a conflict between a head contractor and subcontractor Clause 32 BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment Maximum penalty for corporation: $189,225
Comply with order of priority payment when there is a conflict between subcontractors Clause 33 BIF Act	Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) or 1 year imprisonment Maximum penalty for corporation: $63,075
Ensure any retention amount for a subcontract is held in the retention account Clause 34(1) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 2 years imprisonment Maximum penalty for corporation: $126,150
Make withdrawals from the retention account in accordance with the subcontract Clause 34(2) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment Maximum penalty for corporation: $189,225
Ensure the amount held in retention is identifiable as being held for the subcontractor beneficiary Clause 34(3) BIF Act	Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) Maximum penalty for corporation: $63,075
Transfer disputed funds into the disputed trust account Clause 36(1) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Ensure the disputed funds are not paid to any person other than the subcontractor, the head contractor or another person prescribed by regulation. Clause 36(5) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment Maximum penalty for corporation: $189,225
Immediately inform the subcontractor, in writing, when the amount was transferred into the disputed funds account Clause 36(6) BIF Act	Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50) Maximum penalty for corporation: $31,536
Unless subject to an ongoing dispute resolution process, return the amount to the PBA from which it was transferred, as soon as practicable. Clause 36(8) BIF Act	Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50)Maximum penalty for corporation: $31,536
Refrain from premature dissolution of the PBA Clause 38 BIF Act	Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075) or 1 year imprisonment Maximum penalty for corporation: $315,375
Refrain from investing the funds held in PBA Clause 40 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Keep written records of all transactions involving the PBA as prescribed in the Act Clause 45(1) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 1 year imprisonment Maximum penalty for corporation: $189,225
Retain a copy of the records for at least 7 years Clause 45(3) BIF Act	Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 1 year imprisonment Maximum penalty corporation: $189,225
Provide the subcontractor with the required information with the approved form Clause 49 BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Within 5 business days after entering the subcontractor, provide the principal with the information prescribed by regulation Clause 50(2) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Within 5 days of becoming aware of a change in information, advise the principal of the change Clause 50(3) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Provide the principal and subcontractor with a copy of the payment instruction given to a financial institution Clause 51(2) BIF Act	Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) Maximum penalty for corporation: $63,075
Refrain from providing the principal and subcontractor information the head contractor knows to be false or misleading Clause 51(4) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) Maximum penalty for corporation: $126,150
Failure of Principal to inform the commissioner of any discrepancies in the payment instruction Clause 52 BIF Act	Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) Maximum penalty for corporation: $63,075
If the principal is appointed as trustee for the PBA, provide the principal with the information required under the Act Clause 55(2) BIF Act	Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment Maximum penalty for corporation: $126,150
Inform the relevant financial institution that the principal will act as the trustee to the PBA Clause 55(3) BIF Act	Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50) Maximum penalty for corporation:: $31,536
Upon written request from the principal, the person with the information required by the principal to act as trustee to the PBA must provide such information Clause 55(4) BIF Act	Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50) Maximum penalty for corporation: $31,536

FAILURE BY THE HEAD CONTRACTOR TO:

PENALTY:

Establish a PBA by opening the appropriate accounts, prescribed by the Act
Clause 23(1) Building Industry Fairness (Security of Payment) Act 2017 (BIF Act).

Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075)

Maximum penalty for corporation: $315,375

Establish a PBA 20 business days after the start
date
Clause 23 (7) BIF Act.

Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075)

Maximum penalty for corporation: $315,375

Ensure deposits, withdrawals and transfers,
from and between PBA are only made using
online transfers and only using a payment instruction given to the institution.
Clause 24(1) BIF Act

Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075)

Maximum penalty for corporation: $315,375

Ensure principal can view:

(a) Deposits and withdrawals to the PBA

(b) Information relevant to payment instructions

Clause 24(2) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Ensure the account’s name includes the words
‘trust account’
Clause 25 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Give the principal written notice within 10
days after either opening, closing or changing
the name of a trust account:
Clause 26 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Ensure that all payments from principal are deposited in the PBA (exceptions apply)
Clause 27(2) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Upon a contravention of Clause 27(2)
(ABOVE), deposit the amount into the PBA
as soon as practicable
Clause 27(4) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 2 years imprisonment

Maximum penalty for corporation: $126,150

Prevent deposits into PBA for an improper
purpose, not prescribed by the Act
Clause 28 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Ensure all payments to the subcontractor
are paid from the PBA
Clause 29 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Cover any shortfall in the PBA
Clause 30 BIF Act

Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) or 1 year imprisonment

Maximum penalty for corporation: $63,075

Refrain from improper withdrawal from
the PBA
Clause 31(1) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment

Maximum penalty for corporation: $189,225

Upon improper withdrawal, repay amounts withdrawn as soon as practicable
Clause 31(2) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment

Maximum penalty for corporation: $189,225

Comply with order of priority payment when
there is a conflict between a head contractor
and subcontractor
Clause 32 BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment

Maximum penalty for corporation: $189,225

Comply with order of priority payment when
there is a conflict between subcontractors
Clause 33 BIF Act

Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615) or 1 year imprisonment

Maximum penalty for corporation: $63,075

Ensure any retention amount for a subcontract
is held in the retention account
Clause 34(1) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 2 years imprisonment

Maximum penalty for corporation: $126,150

Make withdrawals from the retention account
in accordance with the subcontract
Clause 34(2) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment

Maximum penalty for corporation: $189,225

Ensure the amount held in retention is
identifiable as being held for the
subcontractor beneficiary
Clause 34(3) BIF Act

Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615)

Maximum penalty for corporation: $63,075

Transfer disputed funds into the disputed
trust account
Clause 36(1) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Ensure the disputed funds are not paid to
any person other than the subcontractor,
the head contractor or another person
prescribed by regulation.
Clause 36(5) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 2 years imprisonment

Maximum penalty for corporation: $189,225

Immediately inform the subcontractor,
in writing, when the amount was transferred
into the disputed funds account
Clause 36(6) BIF Act

Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50)

Maximum penalty for corporation: $31,536

Unless subject to an ongoing dispute
resolution process, return the amount
to the PBA from which it was transferred,
as soon as practicable.
Clause 36(8) BIF Act

Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50)Maximum penalty for corporation: $31,536

Refrain from premature dissolution of
the PBA
Clause 38 BIF Act

Maximum penalty for individual: 500 penalty units (equivalent to a fine of $63,075) or 1 year imprisonment

Maximum penalty for corporation: $315,375

Refrain from investing the funds held
in PBA
Clause 40 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Keep written records of all transactions
involving the PBA as prescribed in the Act
Clause 45(1) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 1 year imprisonment

Maximum penalty for corporation: $189,225

Retain a copy of the records for at least
7 years
Clause 45(3) BIF Act

Maximum penalty for individual: 300 penalty units (equivalent to a fine of $37,845) or 1 year imprisonment

Maximum penalty corporation: $189,225

Provide the subcontractor with the
required information with the approved
form
Clause 49 BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Within 5 business days after entering the subcontractor, provide the principal with
the information prescribed by regulation
Clause 50(2) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Within 5 days of becoming aware of a
change in information, advise the principal
of the change
Clause 50(3) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Provide the principal and subcontractor
with a copy of the payment instruction
given to a financial institution
Clause 51(2) BIF Act

Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615)

Maximum penalty for corporation: $63,075

Refrain from providing the principal and subcontractor information the head
contractor knows to be false or misleading
Clause 51(4) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230)

Maximum penalty for corporation: $126,150

Failure of Principal to inform the
commissioner of any discrepancies in the
payment instruction
Clause 52 BIF Act

Maximum penalty for individual: 100 penalty units (equivalent to a fine of $12,615)

Maximum penalty for corporation: $63,075

If the principal is appointed as trustee
for the PBA, provide the principal with the information required under the Act
Clause 55(2) BIF Act

Maximum penalty for individual: 200 penalty units (equivalent to a fine of $25,230) or 1 year imprisonment

Maximum penalty for corporation: $126,150

Inform the relevant financial institution
that the principal will act as the trustee
to the PBA
Clause 55(3) BIF Act

Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50)

Maximum penalty for corporation:: $31,536

Upon written request from the principal,
the person with the information required
by the principal to act as trustee to the
PBA must provide such information
Clause 55(4) BIF Act

Maximum penalty for individual: 50 penalty units (equivalent to a fine of $6,307.50)

Maximum penalty for corporation: $31,536

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