Fairer payments on jobsites: Bill to amend the Victorian Security of Payment Act introduced to the Parliament

The Victorian Government has introduced the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 into Parliament, which proposes significant changes to the existing Building and Construction Industry Security of Payment Act 2002 (VIC) (Act).  These changes aim to improve fairness, transparency, and efficiency in payment practices of the construction industry, broadly bringing Victoria in line with the rest of Australia.

We summarise below the key changes that you should be aware of:

1. Performance Security claims

Contractors will be able to make independent claims for release of performance security (e.g. retention money or bonds), separate to payment claims.

2. Notice of intention to call on security

Principals will have to give at least 5 business days’ notice of intention to call on performance security, regardless of the wording under the contract.

3. Holiday blackout period

A blackout period for adjudication applications will be introduced from 22 December to 10 January in the following year (a celebration for anyone who has been on the receiving end of a “holiday special” adjudication).

4. Simplified claim timing

The time for making payment claims will be simplified, removing ‘reference dates’ and providing for a simple entitlement to claim once per month.  Claims in December will need to be made by 22 December (prior to the blackout period), with any work after that date included in the January claim.

Claims will need to be served within 6 months of practical completion (or a date specified under the contract).

5. Removal of ‘excluded amounts’ regime

The current ‘excluded amounts’ regime will be repealed, along with the distinction between ‘claimable variations’ and ‘excluded amounts’.

6. Maximum payment timeframes

Claims must be paid within 20 business days of receipt of the payment claim (i.e. usually 10 business days after the payment schedule).

7. Unfair time bars

Notice-based time bar clauses in contracts may be declared unfair and not apply if compliance is not reasonably possible or would be unreasonably onerous.

8. No new reasons at adjudication

Respondents to an adjudication application cannot raise new reasons for withholding payment or performance security in their adjudication response if those reasons were not included in the payment schedule.

Application of the Amended Act – Applies to existing projects

If passed, the amending Act will into operation on a day to be proclaimed, but no later than 1 September 2026.

The transitional provision of the amending Act (s 54) provides that, in general, the amendments will apply to contracts entered into prior to the amended Act commencing.  It is uncommon for legislative changes of this nature to apply to existing contracts, so this is likely to create gaps in existing contracts with a projected date for practical completion later than 1 September 2026 (or potentially earlier).

There are few exceptions, which include:

• payment claims served under section 14 of the current Act (prior to the amending Act coming into operation); and
• adjudication applications made under section 18 of the current Act but not yet determined when the amending Act comes into operation.

Practical actions – Next steps for principals, contractors, consultants and suppliers

In light of these changes, Gadens recommends that principals, contractors, consultants and suppliers consider taking the following actions to prepare for the new changes:

• review standard wording in head contracts, subcontracts and consultancy agreements;
• review processes around assessing payment claims and issuing payment schedules to ensure that payment schedules are comprehensive and comply with the new regime;
• consider whether time-bars in existing contracts are “unreasonably onerous” or otherwise unfair and should be removed or extended; and
• insert 5-day notice periods for recourse to performance security.

In particular, we recommend that project managers (internal and external) and superintendents are given the tools and training necessary to bolster standard responses to claims as part of preparing payment schedules.  The restrictions on raising new reasons for rejecting payments (potentially including reliance on contractual clauses not referred to in payment schedules) coupled with the removal of the ‘excluded amounts’ regime will leave principals exposed if they are not prepared.

We anticipate that the removal of the ‘excluded amounts’ regime, which will allow contractors to bring time-related claims and claims relating to disputed variations among other things, will result in a material increase in adjudication applications.

Contractors should consider whether the reasons provided in payment schedules for withholding payment are accurate and specific enough to explain why payment has been withheld.  If not, there will much broader scope to submit an adjudication application contesting those reasons (or lack of reasons).

Further amendments anticipated

The amendments tabled as part of this new bill contain only the “tranche 1” changes.  Tranche 2 is anticipated to address a trust regime for retention monies to secure performance security, statutory trusts to secure payments and the application of the legislation to residential construction work.

Gadens Construction team is well placed to advise in relation to these issues and assist in preparing for the next new changes. Please get in touch if you would like to discuss.

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Authored by:
Daniel Middleton, Partner
Scott Coffey, Senior Associate
Yangfan Xia, Lawyer