The reforms follow recommendations made by the state’s inquiry into last year’s numerous building company collapses, which left thousands of subcontractors more than $1 billion out of pocket.

Key legislative changes include the establishment of a cash retention trust scheme for subcontractors, as well as the introduction of prompt payment provisions to enhance cash flow and address the issue of delayed payment to subcontractors and head contractors.

“Head contractors will be required to pay subcontractors progress payments within

30 days rather than the long payment cycles of 45-60 days and on occasion up to

120 days,” state Finance and Services Minister Greg Pearce said.

The reforms also include the enactment of a legal requirement for written statements by head contractors to ensure all subcontractors are paid and allowing authorised officers to investigate and prosecute offences.

In addition, subcontractors will benefit from the implementation of a trial of project bank accounts on government construction contracts, where government will directly pay subcontractors and financially assess contractors regularly.

An Industry Advisory Taskforce will also be established to develop an education program targeting subcontractors to improve business and financial management skills in the industry.

“These reforms are aimed at providing better protections for builders, subcontractors and suppliers working in the industry,” Pearce said.

“The inquiry received numerous submissions from builders claiming their payments are often withheld or retention sums misused by head contractors yet they are the ones that suffer.

“Through our reforms NSW will become the first state to set up a trust fund scheme administered by the Office of the Small Business Commissioner to protect retention sums.”

High-profile building firm collapses last year included Reed Construction, Kell & Rigby, St Hilliers Construction, Lowrie Constructions, Baseline Constructions, D&G Hoist and Crane and Nahas Construction.