QBCC Abolishment Of Head Contractor Exemption Pushed Out to July 2022
Reforms commencing 24 July 2022 to the Queensland Building and Construction Act 1991 (Qld) (QBCC Act) will impact entities, including developers, head contractors and foreign entities, entering into contracts for building work without a QBCC licence.
Current Licence Requirements under QBCC Act
The QBCC Act generally requires that an entity must hold an appropriate QBCC licence to be able to carry out building work.
“Building work” is broadly defined under the QBCC Act to include providing administration, advisory, management or supervisory services for building work. Work that is not building work under the QBCC Act is set out at schedule 1 of the Queensland Building and Construction Commission Regulation 2018 (Qld).
Where persons contravene the general requirement to hold a QBCC licence to undertake building work:
- they are not entitled to any monetary or other consideration for the building work carried out without a licence; and
- individuals can also be penalised up to $46,707 or up to one year’s imprisonment.
Exemptions to the general requirement to hold a QBCC licence are set out at schedule 1A of the QBCC Act. One of the exemptions under the QBCC Act permits an entity to enter into a contract to carry out building work, that is not residential construction work or domestic building work, without a QBCC licence provided the building work is to be carried out by an appropriately licensed subcontractor (Head Contractor Exemption). Head contractors and property developers have taken advantage of the Head Contractor Exemption to enter into contracts for building work without having a QBCC license.
Removal of the Head Contractor Exemption
On 23 July 2020, a suite of reforms to the QBCC Act were passed under the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 (Qld). One of the reforms included the removal of the Head Contractor Exemption from the QBCC Act.
The provisions removing the Head Contractor Exemption were due to commence on 24 July 2021, but have been pushed back to 24 July 2022 to allow for “additional time to consult on implementation.”
Once the amendments come into effect, head contractors and property developers will no longer be in a position to take advantage of the Head Contractor Exemption. This therefore means that all entities will
need to ensure that they hold an appropriate licence under the QBCC Act to contract to undertake building work, unless another exemption under the QBCC Act applies.
In preparation for the reforms, parties without appropriate QBCC licences should:
- review their contractual documents to consider whether they include “building work,” which is broadly defined under the QBCC Act and consider if any amendments need to be made to those documents;
- consider whether it would be appropriate to obtain a QBCC building licence or consider alternative options to ensure compliance with the reforms to the QBCC Act; and
- carefully consider whether any proposed variations could be classified as building work. Even if parties subcontract the variations to licensed entities, they may be caught by the reforms.
Subcontractors should also have regard to whether or not head contractors are licenced prior to entering into subcontracts. Should head contractors fall foul of the QBCC Act’s requirement to be licensed, they may not be entitled to payment under a head contract, which could be detrimental to subcontractor’s receiving payment for their works when they fall due.
If you would like to discuss how best to approach any of the issues identified above, please contact one of our experts by email on [email protected] or by telephone on 07 3009 8444 to engage in an obligation free discussion.