Breadth of Victorian security of payment regime reforms revealed

The reforms, when introduced, will have a significant impact on the building industry in Victoria by bringing the state in line with the security of payment regimes operating across the rest of Australia and expanding its scope.

The Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 was released on 11 September, introducing 16 of the 28 recommendations proposed in the 216-page report (216-page / 2.15MB PDF) that was the result of the inquiry. The bill proposes significant amendments to the current Building and Construction Industry Security of Payment Act.

Excluded amounts and claimable variations 

Excluded amounts, which were unique to the Victorian regime, will be abolished, meaning that time-related costs and certain disputed variations will now be available to be recovered under the security of payment regime. This will broaden the scope of what is claimable under the Act, while also reducing potential defences to claims that were previously available to respondents. 

Performance security regime 

Claimants may now claim for the release of the whole or part of a performance security, such as a performance bond or retention money, and may serve a claim for that release. This may be served no earlier than the earliest of either 20 business days after the end of the relevant defects liability period, or “on or after a day, or on or after the day of the occurrence of an event (if any) specified in the construction contract”.  

Recourse to security

Recourse to performance security is now prohibited unless notice has been given, and five business days have passed since that notice was given. 

‘Pay when paid’ provisions  

The pay when paid restrictions have now been broadened, meaning that a provision is invalid if it makes any of the following contingent or dependant on the operation of another contract:

• liability to pay money owing; 
• due date for payment;  
• right to claim money; and  
• right to claim the release of performance security. 

Notice-based time bars 

The bill will enable adjudicators, courts, arbitrators or expert determiners to declare that a notice-based time bar provision is unfair if compliance is not reasonably possible, or would be unreasonably onerous. In determining whether a notice-based time bar is unfair, the decision maker must consider several factors, including when and how the notice is required to be given and the relative bargaining power of each party in entering into the contract.  

Christmas shutdown 

The period from 22 December to 10 January will be excluded from the definition of “business day”, meaning that time will not be running for the purposes of the Act, reflecting a period where the construction and building industry is normally closed. This adopted recommendation four of the committee’s report, which stated that such an amendment would “help ensure that both contractors claiming payment and those responding to payment claims are afforded procedural fairness”, rather than having to comply with strict and onerous deadlines over the shutdown.

Payment claims that relate to the carrying out of works in the period between 22 December and 31 December may be served on and from 31 January in the following year, giving further relief to both claimants and respondents over the holiday period. 

No new reasons for withholding payment 

An adjudicator is no longer entitled to consider reasons that were not set out in the payment schedule and respondents are not entitled to raise new reasons for withholding payment in their adjudication response. This means that it is of the utmost importance that a payment schedule contains all potential reasons for withholding payment, as there is no longer a way to introduce new reasons in an adjudication response.  

No more reference dates 

Reference dates are no longer, with payment claims now being able to be served on and from the last day of the named month in which work was first carried out, and each subsequent named month during which further work is carried out under the contract or an earlier date specified in the contract. 

If a payment claim is served before the earliest day for a payment claim to be served it is not invalid, and is instead treated as being served on the earliest day and time for service of a payment claim, being on and from the last day of each named month in which work is carried out, as provided by the new section 14A.

However, a claimant will not be entitled to serve more than one payment claim a month.

Additionally, an entitlement to serve a payment claim is not affected by termination, purported termination or expiry of the construction contract under which the party is or may be liable to make the payment.

Late adjudication determination 

An adjudicator’s determination will not be invalid solely because it is made after the time allowed for in determining the adjudication application. This codifies what had already been set out by the Victorian Court of Appeal in the 2018 case Ian Street Developer v Arrow International.

Timing for payment 

A term or provision in a construction contract has no effect to the extent that it provides for the payment of a progress payment or the release of a performance security later than 20 business days after service of a payment or performance security claim.

These amendments appear to take effect immediately upon the bill becoming law, and apply to contracts entered into at any time, even if they were entered into before the amendments came into force. Debate on the bill has been adjourned for two weeks, and it is not currently known when the bill will come into force, but it will be by at least 1 September 2026, with some suggestion that it is likely to be adopted by early 2026.