Security of Payment Act ACT: a builders guide

What it is

The Building and Construction Industry (Security of Payment) Act 2009 (ACT) is the Australian Capital Territorys version of the East Coast model. It gives any contractor, subcontractor or supplier carrying out construction work in the ACT a statutory right to claim progress payments, force a written response and run a fast adjudication if the payment is not made.

The Act applies regardless of what the contract says. A clause that purports to contract out of the Act or limit a claimants rights under the Act is void. That is the design point. Builders cannot be drafted out of the protections by skilled principals.

Recent amendments

Significant amendments came into force on 11 March 2024 and apply to construction contracts entered on and from that date. The changes standardised the time for an adjudication application, shortened the notice period for proceeding when no payment schedule is given and brought the ACT regime closer in line with the NSW model.

If your contract was signed before 11 March 2024 the older timeframes still apply. Check the contract date before relying on any deadline.

Who it applies to

The Act applies to construction contracts for construction work carried out in the ACT or for related goods and services supplied for the purpose of construction work in the ACT.

The Act excludes:

• Contracts that form part of a loan agreement or guarantee
• Contracts for construction work on a residential building where the principal is an owner-occupier and the work is carried out for their occupation
• Contracts where the consideration is not money

The owner-occupier exclusion means a residential builder dealing directly with a homeowner client cannot use the Act against that client. Subcontractors lower down the chain can still use the Act against the builder.

Payment claim

A payment claim must be in writing, identify the construction work, state the amount claimed and the date payment is sought. It must state that it is made under the Building and Construction Industry (Security of Payment) Act 2009 (ACT).

A payment claim can be served on each reference date provided for in the contract. If the contract is silent the reference date is the last day of each month in which work was first carried out and the last day of each following month.

A payment claim can be made within 12 months of when the construction work was last carried out or the related goods and services were last supplied.

Payment schedule

A respondent who receives a payment claim has 10 business days to give a payment schedule, unless the contract provides for a shorter period. The schedule must:

• Identify the payment claim
• State the scheduled amount the respondent proposes to pay
• If the scheduled amount is less than the claimed amount, state the reasons and the reasons for withholding any amount

If the respondent fails to give a schedule the respondent is liable for the full claimed amount. The respondent then loses the right to dispute the amount in any subsequent adjudication or court proceeding.

Adjudication application

Under the 2024 amendments the timeframes are now:

• 10 business days after the claimant receives the payment schedule, where a schedule was given
• 20 business days after the due date for payment, where no schedule was given and the amount was not paid

The application is lodged with an Authorised Nominating Authority which appoints an adjudicator from its panel. The ANA must refer the application to the adjudicator who must accept or decline within set timeframes.

Adjudication response

A respondent has 7 business days after receiving the adjudication application, or 5 business days after notice of acceptance by the adjudicator, whichever is later, to lodge a response. The response is limited to matters raised in the payment schedule. New reasons for withholding payment cannot be raised at the adjudication stage if they were not in the schedule.

Determination and payment

The adjudicator must determine the application within 10 business days from the date of acceptance, unless the parties agree to a longer period. The determination is final on the documents and is enforceable as a judgment debt by registration in the Magistrates Court or Supreme Court of the ACT.

The adjudicated amount must be paid within 5 business days of the determination being served unless the determination specifies a different date.

Suspension and enforcement

If the respondent fails to pay the adjudicated amount the claimant can:

• Suspend the carrying out of construction work after giving 3 business days written notice
• Recover the unpaid amount in court as a debt due
• Lodge the determination as a judgment in the Magistrates Court or Supreme Court of the ACT for enforcement

Suspension is a strong remedy. It removes the contractual risk of repudiation provided the notice and process are followed properly.

Practical points for ACT builders

Endorse every progress claim with the words "This is a payment claim made under the Building and Construction Industry (Security of Payment) Act 2009 (ACT)". Without the endorsement the document is not a payment claim.

Track the contract execution date. The 2024 amendments draw a hard line. Older contracts run on the old timeframes and there is no rollover.

Owner-occupier carve-out catches out subcontractors who assume the Act protects every job. The carve-out only protects the principal-to-builder layer. Subcontract chains below that level remain inside the Act.