What is the Security of Payments Act? (VIC)

Oct 6, 2016
Reading Time: 3 minutes
Written by Jennifer Wang

Are you employing a contractor to help with an odd job around the house? Do you have a contract or an existing payment plan? Be careful as there are legislative provisions that regulate how and when you pay those workers. The Building and Construction Industry Security of Payment Act 2002 (Vic) is a state based legislation that ensures fair and timely payments for work and supplies delivered in the building and construction industry.

In Victoria, the industry is regulated by the Building and Construction Industry Security of Payment (Amendment) Act 2006 which applies to all construction contracts entered into on or after 30 March 2007. The amended Act protects the entitlement of construction workers to receive a wider range of payments including single payments, final payments and milestone payments in relation to the carrying out of work and the supplying of goods and services under a contract.

Get in touch with expert construction lawyers to help you understand your rights and obligations when hiring contractors for a construction project.

Entitlement to payment

Under the amended Act, contractors are entitled to claim for a wider range of payments. For contracts entered into on or after the 30 March 2007, ‘progress payments’ include single payments, milestone payments and final payments under any contract. However a time limit of 3months applies for making payment claims, including final payment claims. This includes verbal, written contracts and absent contracts where the contract may stipulate that the contractor is not entitled to claim progress payments.

Progress payments are calculated on the value of work or supplies that have been carried out or delivered and the terms of the contract. The amended Act ensured that interest is payable on unpaid progress payments which is calculated in accordance with the Penalty Interest Rates Act 1983 (Vic).

Payment claims

Where there is a progress payment owing for construction work and a claim has been made by the owed party, the Act specifies that payment must be made within 10 business days after a payment claim is made. If full payment for the goods or services is not made within the due date, a payment schedule must be provided to the claimant within 10 business days of the claim.

Payment schedule

If a person does not intend to pay the total amount claimed, they may provide a payment schedule within 10 days of the claim being made. A payment schedule is a notice in writing which must be served on a claimant if the person does not intend to pay the full amount of a payment claim under the Act by the due date for payment. The payment schedule must identify the payment amount being claimed and state reasons as to why the person proposes to pay less than the amount claimed.

Improved adjudication

If there is a dispute or unresolved conflict between the parties regarding the amount claimed, the claimant can apply for adjudication by contacting an Authorised Nominating Authority (ANA). The ANA is responsible for the adjudication process and will nominate an adjudicator who they believe has the necessary skills and experience to adjudicate the dispute.

This adjudication will determine the amount payable within 10 business days (or 15 business days if the claimant has agreed). Should the amount determined exceed $100,000 either party are eligible to apply for an adjudication review. The Act also provides that if an adjudicator takes into account matters that are not permitted to be claimed under the Act then their determination is void and of no effect.

Breach of the Act

The amended Building and Construction Industry Security of Payment Act protects the rights of contractors and suppliers under a construction contract to receive and recover progress payments for carrying out work and supplying related goods and services. The amendments introduced an expedited process to enforce payments if a person fails to pay an adjudicated amount. The claimant can request a certificate from the ANA and lodge it as an application in Court.

If you have a payment dispute or are looking to hire a contractor, LawPath’s experienced construction lawyers can advise you on your rights and obligations.

Want to learn more? Contact a LawPath consultant on 1800LAWPATH to learn more about customising employment contracts, as well as other legal documents and obtaining a fixed-fee quote from our network of 600+ expert lawyers.

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