Significant amendments to the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) have taken effect as of 15 April 2026. The changes are generally contractor-friendly and are expected to greatly expand the scope of payment claims made by contractors.
Industry participants should review any construction contracts currently on foot or being negotiated, and ensure their commercial processes are consistent with the new amendments. Most importantly, parties should keep in mind that:
- notice-based time bar provisions for making payment claims or claiming extensions of time are at risk of being declared 'unfair' and nullified in an adjudication, court, arbitration, or expert determination;
- payment claims may now be made up to six months after practical completion of all construction works under the contract;
- performance security claims for the release of performance security may be made starting 20 business days after the expiry of the defects' liability period under the contract, or earlier if specified in the contract;
- payment terms must be no longer than 20 business days after the corresponding payment claim is served; and
- payment schedules and performance security schedules should include all reasons relevant to determining the scheduled amount, as new reasons will not be considered in an adjudication.
We discuss some of the key amendments in greater detail below.
Power to nullify unfair time bar provisions
Section 13A of the Act allows, in any formal dispute resolution proceeding to which the Act applies, the person presiding over the dispute to declare that a notice-based time bar provision is 'unfair'. The effect of such a declaration is that the unfair time bar will have no effect on the particular entitlement the subject of the proceeding.
The Act allows an unfair time bar declaration to be made by an adjudicator, court, arbitrator or expert determiner in the corresponding forum.
Of particular note:
- The definition of 'notice-based time bar provision' is broad and includes time bars for the contractor's entitlement to be paid, as well as for extensions of time and release of performance security.
- The Act sets out six factors that must be considered in making an unfair time bar declaration. The most relevant of these factors for sophisticated commercial parties are:
- when the party required to give notice would reasonably have become aware of the last day on which notice could be given;
- when and how notice is required to be given; and
- whether the matters set out in the notice are final and binding (if compliance with the provision is alleged to be unreasonably onerous).
- In making such a declaration, the Act expressly prohibits the decisionmaker from considering the provisions of, or the things that happened under, any related contracts (for instance any corresponding time bars imposed on the respondent pursuant to a linked claims regime).
The new Victorian provision resembles a similar provision in the Western Australian Building and Construction Industry (Security of Payment) Act 2021 (WA).
Amendments to payment claim scope
Abolition of Excluded Amounts:
The amendments eliminate the 'excluded amounts' regime, which was unique to the Victorian regime and previously prevented payment claims being made in respect of:
- variations (other than certain 'claimable variations');
- latent conditions;
- time-related costs (such as extensions of time, delay damages, and acceleration costs);
- changes in regulatory requirements;
- damages (for breach of contract, and any other claim arising under or in connection with the contract); and
- any claims arising at law other than under the contract.
We note this now means that owners will be able to deduct or set-off liquidated damages against payment claims made under the Act, where the contract provides for this.
Express right to claim release of Performance Security:
The Act introduces a parallel regime for claimants to seek the release of performance security at the end of the defects liability period by submitting a 'performance security claim', which must be met by a 'performance security schedule'.
As with payment claims, where the scheduled amount in the performance security schedule is less than the amount claimed, a claimant may apply for adjudication of its performance security claim.
The Act also introduces a mandatory five business day notice period prior to any entitlement to have recourse to the whole or part of performance security.
Amendments to payment claim process
Removal of 'Reference Dates':
The Act allows payment claims to be made on and from the last day of each month (or earlier if the contract permits), removing the need for a 'reference date' to arise under the construction contract before making a payment claim.
Extended time to make claims:
The Act allows payment claims to be made up to six months after practical completion of all construction work to be carried out under the construction contract. Previously, payment claims could only be made within three months after the corresponding reference date.
Maximum payment terms
The Act imposes maximum payment terms of 20 business days after service of a payment claim or performance security claim to make the corresponding payment.
If the contract provides for longer payment terms, or no payment terms are provided, the payment will become due and payable ten business days after the earliest day the claim may be made (i.e. the end of the month for payment claims, or at the end of the defects liability period for performance security claims).
No new reasons
In determining an adjudication application, the adjudicator must not take into account any reasons for non-payment advanced by the respondent if those reasons were not set out in the relevant payment schedule or performance security schedule. This change aligns the Victorian position with the corresponding security of payment regimes in other states.
Christmas shutdown period
Victoria will now observe a 'pause' in security of payment timelines between 22 December and 10 January each year. This means that these dates will no longer count as 'business days' for the purpose of calculating various deadlines under the Act. This change provides relief during the holiday season from the strict SOP deadlines.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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