The Western Australian Government has introduced legislation to Parliament that would replace Project Bank Accounts with a deemed construction trust scheme for certain State Government construction projects.
The proposed changes are contained in the Building and Construction Industry (Security of Payment) Amendment Bill 2026. If passed, the legislation would apply to State Government-led construction projects valued at more than $1.5 million.
The reform is intended to streamline existing insolvency protections for subcontractors while reducing administrative requirements associated with the current Project Bank Account framework.
Transition from Project Bank Accounts
Western Australia introduced Project Bank Accounts in 2021 as part of broader security of payment reforms. The system required specific funds on government construction projects to be held in designated bank accounts to ensure subcontractors were paid if a head contractor became insolvent.
The Government has stated that while the system provided protections, it also involved complex paperwork and banking arrangements. The new Bill proposes replacing that model with a deemed construction trust scheme, which would operate by force of law rather than through multiple dedicated bank accounts.
Under the proposed structure, funds payable to subcontractors on eligible projects would be deemed to be held on trust, providing legal protection in the event of insolvency.
Scope of the Proposed Scheme
The trust scheme would apply to State Government construction projects exceeding $1.5 million. This threshold captures a range of public works, including infrastructure, education, health, housing and transport projects delivered by or on behalf of the State.
The Government has described the change as a refinement of existing protections rather than a reduction in subcontractor safeguards.
Commerce Minister Dr Tony Buti said the legislation aims to provide clarity while reducing compliance complexity.
“These laws will provide clarity and certainty to all parties, while reducing the administrative burden of the current project bank account regime,” Dr Buti said.
Insolvency Protection Focus
Subcontractors are often exposed to financial risk when head contractors experience insolvency. Payment security legislation seeks to reduce that exposure by ensuring funds intended for subcontractors are protected from being used for other purposes.
The proposed deemed trust model is designed to maintain protections by legally separating relevant funds from general contractor assets in the event of insolvency.
According to the Government, the reform continues its approach to improving payment security within the construction sector.
“The Cook Government is committed to protecting subcontractors and ensuring they are appropriately paid for their work on government construction projects in the event of an upstream insolvency,” Dr Buti said.
Building on Earlier Reforms
The 2026 Amendment Bill builds on reforms introduced in 2021, which included the implementation of retention trust schemes and expanded payment protections across the industry.
Western Australia has previously positioned its reforms as among the most comprehensive nationally in relation to subcontractor payment security. The current proposal is presented as an adjustment to improve consistency and operational efficiency.
The Government has stated that industry stakeholders, including peak bodies and construction representatives, were consulted during preparation of the Bill.
Dr Buti acknowledged industry input in shaping the proposed amendments.
“I would like to thank the building industry, peak bodies, and others who provided comments and feedback during the preparation of the Bill,” he said.
Administrative Implications
If enacted, the legislation would remove the requirement for contractors to establish and manage multiple Project Bank Accounts for eligible projects. Instead, trust obligations would arise automatically under the legislation.
The practical effect is expected to reduce banking and documentation requirements while retaining statutory obligations regarding payment handling.
Further operational detail is likely to be clarified through supporting regulations and guidance following parliamentary consideration.
National Payment Security Context
Security of payment frameworks differ across Australian jurisdictions. Most states and territories have implemented measures aimed at accelerating payment timeframes, improving adjudication processes, and introducing trust mechanisms.
Western Australia’s reforms sit within this broader national landscape. The shift from Project Bank Accounts to a deemed trust structure represents a modification of the State’s existing model rather than a departure from payment protection principles.
Dr Buti said the Bill would again place Western Australia at the forefront of subcontractor protections.
“This Bill will again place Western Australia at the national forefront when it comes to subcontractor protections,” he said.
Ongoing Parliamentary Process
The Building and Construction Industry (Security of Payment) Amendment Bill 2026 has been introduced to Parliament and will proceed through the legislative process in the coming weeks.
If passed, the new construction trust scheme would apply to future State Government construction projects that meet the specified value threshold.
Stakeholders across the construction industry are expected to review the proposed changes as the Bill progresses, particularly in relation to implementation details and compliance obligations.
The legislation forms part of the Government’s broader infrastructure and public works program, which includes continued investment in social housing, schools, roads and health facilities.
Further updates will be provided as the Bill advances through Parliament.
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