Latest Security of Payment Amendments

All construction contactors need to be aware of the “security of payments” system – the legislation in Victoria designed to ensure that contractors in the construction industry can recover progress payments.  The system was introduced in 2002 with the enactment of the Building and Construction Industry Security of Payment Act (SOPA).  In Victoria, significant reforms to SOPA commenced on 15 April 2026, intended to improve the system for the benefit of contractors.

Key amendments for contactors to note:

• Payment terms are now 20 business days from payment claim. Any provision in a contract for longer payment terms has no effect.
• Excluded amounts abolished. Previously, some variations, claims relating to latent conditions, time-related costs, claims relating to regulatory changes and damages claims, were excluded form SOPA.  All these claims can now be made under SOPA.
• Return of retention/security. Until now, SOPA did not include claims for payment from cash retention or return of bank guarantees or other security.  These are now expressly included – payment claims can now be made for security.  Further, a party who wishes to have recourse to performance security must provide written notice of its intentions do so at least 5 business days prior to acting.
• Reference dates abolished. Previously, SOPA provided that a payment claim must have a valid reference date – the date that the contract provided for making a payment claim.  Reference dates are now abolished.  The right to claim payment arises on and from the last day of the month.
• Early payment claims are valid. Premature payment claims are no longer invalid but are deemed served on the earliest permissible date.
• Notice-based time bars may be declared to be unfair and of no effect. Contracts often impose very short time limits on notification of claims, and purport to bar the claim completely if it is not made within time.  The amendments give a decision maker the ability to declare a notice-based time bar unfair and of no effect if compliance is not reasonably possible or would be unreasonably onerous.
• Terminated contracts. Termination of a construction contract does not affect the contractor’s right to serve payment claims.
• Final time to make a claim extended from 3 months to 6 months after PC. Contractors can now make payment claims up to 6 months after practical completion.   For performance security claims, a claim may be served up to the last day of the month, in the month after the end of the defect liability period.
• Christmas shutdown. Time does not run for security of payment purposes during the Christmas shutdown period from 22 December to 10 January the following year.

The changes apply to all construction contracts entered into before, on or after 15 April 2026.