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Your guide to the Security of Payment Act in Victoria

August 5, 2020
Resource Centre
Your guide to the Security of Payment Act in Victoria
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Debt collection
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What is the Security of Payment Act, and how does it work in Victoria?

When you're working as a contractor in the construction industry, you have the right to be paid on time. Sadly, this doesn't always happen. The old process of chasing up unpaid receipts — which often involved having to take your debtors to court — could be expensive and time consuming.

In Victoria, Security of Payment legislation is officially called the Building and Construction Industry Security of Payment Act 2002. Read on to find out more about this legislation, including things like:

  • Who it covers
  • How it protects contractors
  • How it works
  • How it is different from other security of payments acts interstate

All Australian states and territories have introduced a Security of Payment Act. While most cover the basics of protecting contractors for non-payment, there are some differences between regions. This article only covers the Security of Payment Act in Victoria, so if you are located in another state, follow the links below for specific information:

Our team at AANDI Lawyers has years of experience in navigating the security of payment process. Find out more about how we can help you achieve a positive result with your security of payments dispute.

Who is covered by the Security of Payment Act VIC?

The Security of Payment Act was instated to protect contractors and sub-contractors working in the construction industry. It can even protect people who only have an oral contract, and you don't need to be a registered building practitioner to get help.

It protects people who are owed money for things like:

  • Work
  • The provision of goods or services
  • Claimable variations

How does the Security of Payment Act protect contractors in Victoria?

Most of the time, pursuing a security of payment claim is a quick and simple way to get the money you are owed. The Security of Payment Act has been designed to spare you the effort, expense, and time that it would take to chase a matter through the courts. Instead, you make your claim, and the matter is resolved by an adjudicator nominated by the Authorised Nominating Authorities (ANA).

Specifically, the main protections afforded under the Security of Payment Act in Victoria are:

  • The right to make regular payment claims
  • Enforced periods of time for principals to respond to claims
  • Minimum interest rates on late payments
  • The right to exercise a lien for unpaid amount over any unfixed equipment or materials
  • Prohibitions on ‘pay when paid’ provisions
  • Default payment terms (10 business days);
  • The right to suspend work following non-payment
  • Prohibition on contracting out of the Act

How does the Victorian Security of Payment Act work?

The below diagram gives you a brief summary of the states and timeframes in claiming under Victoria's Security of Payment Act.

security of payment act vic process

A successful security of payment claim in Victoria requires you to take the following steps:

Make a security of payment claim

When you serve your claim, you must make it clear that you're making a claim under the Building and Construction Industry Security of Payment Act 2002. You must also identify:

  • The work (or goods or services) supplied
  • The amount you are claiming

Your claim has to be made within three months of the reference date, or within the period stated in your contract — whichever is the later date. If your contract doesn't specify any reference dates, the Security of Payment Act will provide them according to the following:

  • A single or one-off payment — The day after the work was completed or the goods and services were supplied according to the contract.
  • Progress payments — 20 business days after the work was first carried out, or the goods and services were first provided. Any subsequent payment claims can be made every 20 business days until the job is finished, or the contract is completed.
  • The final payment — The day after the issuing of the final certificate, or the day after you finish work, or at the end of the defects liability period. If neither of these is applicable, the reference date becomes the day after the work was last performed, or the last day that goods and services were supplied according to the contract.

Receive a schedule for payment

A respondent has 10 business days to create a payment schedule after being served with a claim — unless the contract specifies less time. The payment schedule must:

  • Identify the claim they are responding to
  • Say the amount they are willing to pay
  • Explain any discrepancy between what you're asking them to pay, and what they're willing to pay
  • Identify any excluded amounts, if they allege that there are any

If you're happy with the schedule for payment, all that remains is for the respondent to pay you.

If you're not happy with the schedule for payment, you can go to adjudication. This is usually completed within 10 to 15 business days.

If the respondent does not respond within 10 business days, your legal team can pursue what you're owed in court via adjudication.

Begin the adjudication process

The adjudication process allows a claimant to pursue disputed or entirely unpaid progress payments through a third-party arbitrator. This adjudicator is not a judge, and often not a lawyer, but comes from a nominating authority in Victoria.

Here's how the adjudication process works for Security of Payment in Victoria:

  1. Within 10 days of the date that the payment schedule is set to be served, a claimant writes an application to the adjudicator - the nominating authority.
  2. Any response to this application must be made within 5 business days of receiving, or 2 business days after the adjudicator is appointed.
  3. The adjudicator then determines the application by referencing the application and its response. Neither party needs to appear before the adjudicator.
  4. Adjudication determinations will usually be issued within 10 business days, although in some cases, extensions may be sought.

The adjudicated amount is then set down, which the respondent is required to pay. If it does not immediately, then the claimant can:

  • Give notice of intent to suspend work, and suspend work after 3 business days
  • Apply for an adjudication certificate and pursue the matter in court
  • Following this, commence debt recovery proceedings

This can have drastic consequences for the respondent's credit rating and ability to secure work in the future.

If the respondent is insolvent, it opens up a whole other set of legal issues. If you believe that your respondent is insolvent, get in touch with AANDI Lawyers. Our team can advise you whether the claim is worth pursuing, and what avenues are open to you.

How is Victoria's Building and Construction Industry Security of Payment Act 2002 different to Security of Payment Acts in other states?

Australia does not have federal Security of Payment legislation. Instead, all the states have individual pieces of legislation. As a result, there are slight differences between the acts, which came into effect at different times, and are responsible for different government departments.

For example, New South Wales was the first state to implement such legislation, with the Building and Construction Industry Security of Payment Act 1999. South Australia, the Northern Territory and the Australian Capital Territory didn't get equivalent legislation until 2009.

Fundamentally, all of these acts in different states and territories work in a similar way, to the same end — they establish arbitration as the primary way of resolving these payment disputes, with slight differences in the details.

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