Security of Payment VIC: How Builders and Subbies Get Paid Fast

What it is

The Building and Construction Industry Security of Payment Act 2002 (Vic) is the Victorian equivalent of the NSW scheme but it has its own quirks. The Act gives anyone who carries out construction work or supplies related goods and services under a construction contract in Victoria a statutory entitlement to progress payments. The entitlement applies in addition to any contract terms, and parties cannot contract out of it.

The Victorian scheme is sometimes called the East Coast model because it shares the same core mechanics as NSW, Queensland, Tasmania, the ACT and South Australia. The big Victorian difference is the concept of excluded amounts, which limits what an adjudicator can decide.

Who it applies to

The Act covers most construction contracts performed in Victoria, including residential, commercial and civil work. Section 7 excludes a few categories, including contracts where the work is for a domestic building owner who is not in the business of building. In practical terms a builder cannot bring a Security of Payment claim against an owner-occupier. The Act still applies between the builder and its subbies, between subbies and their suppliers, and between consultants and their principals.

Reference dates and payment claims

A payment claim can only be served on or after a reference date. The contract usually sets reference dates. If it does not, the default under section 9 is the last day of each named month in which construction work was first carried out, and the last day of each subsequent month.

A payment claim under section 14 must:

• be in writing
• identify the construction work or related goods and services
• state the claimed amount
• state that it is made under the Act

A claim cannot include excluded amounts. Section 10B defines excluded amounts as variations that are not claimable variations, damages or claims under the contract such as latent conditions, time-related costs, or any change-in-law claims. This is unique to Victoria. An adjudicator must disregard excluded amounts even if the parties agree they are payable.

Payment schedule and the 10-business-day rule

The respondent has 10 business days from receiving the payment claim, or the time fixed by the contract if shorter, to provide a payment schedule under section 15. The schedule must:

• identify the payment claim it relates to
• state the scheduled amount the respondent proposes to pay
• give reasons for any difference between the claimed and scheduled amounts
• give reasons for withholding any payment

A respondent that does not serve a schedule within the 10 business days becomes liable to pay the full claimed amount on the due date. The claimant can then sue for the debt in court or apply for adjudication after a second-chance notice.

Adjudication

If the claimant disputes the scheduled amount or the respondent fails to pay it, the claimant has 10 business days from the schedule (or from the second-chance notice) to apply for adjudication through an authorised nominating authority. The adjudicator must determine the application within 10 business days of acceptance, or longer if the parties agree.

Adjudication is an interim, pay-now-argue-later mechanism. The determination is enforceable as a judgment debt under section 28R. Final contractual rights are unaffected.

Right to suspend work

Section 29 gives an unpaid claimant the right to suspend work after at least 3 business days written notice if the scheduled or adjudicated amount has not been paid. Suspension is not a breach and the claimant is entitled to an extension of time and compensation for proven loss.

What this means for TradeLens compliance

Victorian builders should set up monthly claim cycles tied to clear reference dates, train estimators to flag excluded-amount risks before they go into a claim and run a strict 10-business-day diary for incoming subcontractor claims. The penalty for missing a schedule is harsh. Once the 10 days pass the law assumes you owe the full amount.