Security of Payment Act 2002 (Vic): 2026 Reforms to Payment Claims and Adjudication

Scope of the Victorian SOP Act

The Building and Construction Industry Security of Payment Act 2002 (Vic) establishes a statutory right to progress payments for construction work and related goods or services in Victoria. The Act’s application extends to construction contracts entered into in Victoria, encompassing both subcontracts and supply contracts. However, owner-occupier residential contracts are excluded from the scope of the Act. Security of Payment (NSW) and Security of Payment (Qld) BIFA operate similarly.

Prior to amendments taking effect on 15 April 2026, Victoria had a unique ‘excluded amounts’ regime that prevented variations and damages from being included in progress claims. This distinguished Victoria from other jurisdictions.

Significant changes introduced by the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Vic) abolished the ‘excluded amounts’ regime from 15 April 2026. This aligns Victoria’s legislation with the approach used in other states, such as New South Wales, Queensland and South Australia. The Victorian Building Authority (VBA) is the regulator responsible for administering the Security of Payment scheme.

Payment claims and the abolition of reference dates

The reforms to the *Security of Payment Act 2002 (Vic)*, commencing 15 April 2026, significantly alter the process for making payment claims. A key change is the abolition of the ‘reference date’ – previously, claimants required a reference date stipulated in the contract before issuing a payment claim. This requirement is removed, providing greater flexibility for claimants. Payment claims may now be made on or from the last day of each month, or earlier if the contract allows.

Claimants will have a longer period to submit payment claims, with at least 6 months after the construction work was last carried out. This timeframe is an increase from the previous 3 months. Following service of a payment claim, maximum payment terms are now capped at 20 business days, overriding any differing terms specified in the contract. Respondents retain 10 business days from service to provide a payment schedule under section 15. Security of Payment (NSW)

New section 13A introduces provisions regarding ‘notice-based time bar’ clauses. These clauses, which limit the time for making a payment claim, can be declared unfair by an adjudicator, court, arbitrator or expert determiner. This change aims to ensure fairness and prevent contracts from unduly restricting a claimant’s rights. The reforms also interact with the National Construction Code.

Adjudication process

The adjudication process begins when a claimant applies to an Authorised Nominating Authority (ANA) authorised by the VBA. This application can be made within 10 business days after receiving the payment schedule (or after the due date for payment, where no schedule is served). The respondent then has 5 business days after receiving the application, or 2 business days after notice of the adjudicator’s acceptance, whichever is later, to lodge a response. Plant safety (WHS Chapter 5) and WHS primary duty (s.19) are important considerations in construction projects.

Following the response period, the adjudicator has 10 business days after appointment (or after the last day for a response) to determine the claim. This timeframe can be extended up to 20 further business days by agreement between the claimant and respondent.

The adjudicator’s determination is enforceable as a judgment debt. This can be enforced through the Magistrates', County or Supreme Court, depending on the amount of the claim. From 2026, any drawdown of performance security will require 5 business days written notice to the other party.

Application to existing contracts and key practical impacts

The 2026 reforms, introduced by the 2025 Amendment Act, will apply to existing contracts. This retrospective application extends to contracts entered into before 15 April 2026, and includes performance security already held under those contracts. This means contractors should review existing contractual arrangements to ensure compliance with the updated requirements. Industrial manslaughter laws by state may also be relevant considerations in contract management.

A key practical impact is the removal of the Victorian carve-out, allowing contractors to now claim variations and damages as progress payments. This expands the scope of recoverable costs within payment claims. However, it’s important to note that ‘pay when paid’ provisions remain unenforceable under section 13 of the Act. Head contractors will also be required to provide a statutory declaration with each progress claim, confirming subcontractor payments, with penalties in place for false declarations to maintain the integrity of the supporting-statement regime. Portable long service leave for construction obligations should also be considered alongside payment obligations.

The Victorian Building Authority (VBA) will have increased powers to inspect, investigate, and pursue enforcement proceedings against Principal Contractors and other PCBUs who misuse the Security of Payment Act regime. This highlights the importance of adhering to the new requirements and ensuring the accurate and timely submission of payment claims and supporting documentation.