Victorian Security of Payment Act: The Most Significant Reforms Since 2006
By Maya Zyl
Victoria’s construction payment laws have recently undergone their most comprehensive overhaul in 20 years – is your business prepared?
In this newsletter, we examine the recent sweeping reforms to Victoria’s security of payment legislation. If you are working in the construction industry, these amendments will affect how you make and respond to payment claims, manage performance security, and structure your contracts.
On 15th April 2026, the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 came into force, amending the Building and Construction Industry Security of Payment Act 2022 (Vic) (SOP Act). The reforms align Victoria with equivalent legislation across Australia and apply retrospectively to all construction contracts – including those entered before the 15th April 2026. However, payment claims already served and adjudication applications not yet determined before that date continue to be governed by the prior version of the Act.
Summary of Key Changes
1. Repeal of the ‘excluded amounts’ regime
2. Abolition of ‘reference dates’ – replaced with a monthly entitlement
3. Extended time to serve payment claims – from 3 months to 6 months after practical completion
4. All grounds for withholding payment must be identified in the payment schedule at the time of service
5. Expanded discretion to render time bar provisions ‘unfair’ and void
6. New statutory regime for performance security
7. Christmas shutdown period (22nd December to 10th January)
Repeal of ‘Excluded Amounts’
Perhaps the most consequential change is the repeal of sections 10A and 10B of the SOP Act, which abolishes the concepts of “claimable variations” and “excludable amounts”. Previously, Victoria was the only Australian jurisdiction to prohibit a broad range of contractual claims – including variation entitlements, latent condition claims, and delay costs – from being pursued through the SOP Act, regularly forcing parties into costly and time-consuming litigation. Contractors may now include these claims in payment claims and adjudication application. The repeal does not apply to payment claims served before 15 April 2026.
Abolition of ‘Reference Dates’ and New Monthly Claim Entitlement
The previous requirement for a ‘reference date’ to accrue before serving a payment claim has been repealed. Claimants may now serve one payment claim per calendar month from the last day of the month in which work was first carried out. A single claim may cover multiple progress payments, unpaid amounts from prior claims, and work from prior months. The right to serve is not extinguished by termination, and a claim served early is taken to have been served on the earliest permissible date. Further, where work is performed between the 22nd to the 31st of December, the claim cannot be served until the 31st of January.
Electronic Service of Payment Claims
The newly inserted s50(2) confirms that payment claims may be served electronically in accordance with the Electronic Transactions (Victoria) Act 2000, provided the recipient has consented to electronic communication, which may be inferred from conduct. A claim sent to a designated address is deemed received when retrievable. A claim sent to a non-designated address is only deemed received once retrievable and the recipient is aware it was sent there.
Extended Time to Serve Payment Claims
The time within which a claimant must submit a payment claim has been extended from 3 months to 6 months after practical completion of all construction work, or 6 months after the supply of all related goods and services. This gives contractors a longer window to prepare and serve claims at the end of the project, which is particularly significant given the broader range of claims now available following the repeal of the excluded amounts regime.
Prohibition on ‘New Reasons’ in Adjudication Responses
Respondents are now strictly limited to the reasons outlined in their payment schedule when responding to an adjudication application – new reasons cannot be raised for the first time in adjudication. Payment schedules must therefore be comprehensive and carefully drafted from the outset. This aligns Victoria with NSW, Queensland and Western Australia.
Time Bar Provisions Can Now Be Declared ‘Unfair’
A time bar provision is a contractual clause requiring a party to give notice of a claim within a specified period after the triggering event – failure to do so results in the claim being lost entirely, regardless of its merits. These provisions can operate harshly, denying a party a legitimate entitlement due to a procedural oversight.
The newly inserted section 13A of the SOP Act introduced a mechanism by which a notice-based time bar provision may be declared ‘unfair’ – and therefore of no effect – where compliance with it was not reasonably possible or was unreasonably onerous. Relevant factors include when the party required to give notice would reasonably have become aware of the deadline, the relative bargaining power of the parties, and whether the matters to be set out in the notice are final and binding.
Maximum Payment Period of 20 Business Days
Respondents must now make payment within 20 business days of receiving a payment claim. Critically, this obligation is not contingent on the claimant taking any further steps – including issuing a tax invoice. The clock runs from receipt of the payment claim itself. Any contractual provision purporting to require the claimant to wait longer than 20 business days is void to that extent.
Performance Security Requirements
Performance security – which includes performance bonds, bank guarantees, and retention money – is now subject to a comprehensive statutory regime under new sections 17A to 17H.
A party entitled to the release of performance security may serve a formal claim for its release. Where the contract does not specify a release date, the security must be released within 10 business days of the earliest claim date – being at least 20 business days after the end of the relevant defects liability period (DLP). If the contract does not specify when the DLP ends, it is deemed to run from practical completion until all required defects are rectified. Any contractual term requiring a longer wait than 20 business days for release is void. Parties cannot contract out of the core provisions, and interest may be payable for late release.
Separately, a party wishing to draw on performance security – for example, a principle calling on a bank guarantee – must now give at least 5 business days’ written notice of their intention to do so. That notice must identify the contract, the contractual provisions relied upon, the amount to be drawn, and the circumstances giving rise to the entitlement. This requirement cannot be contracted out of and aligns Victoria with recently introduced requirements in Western Australia.
What This Means for You
These amendments have immediate practical consequences for all parties to Victorian construction contracts. We recommend the following steps:
• Review all existing contacts for compliance with the amended SOP Act, including those entered before 15th April 2026
• Include all reasons for withholding payment in your payment schedule
• Comply with performance security requirements – give 5 business days’ notice before having recourse, and claim release within the relevant timeframes
• Serve one payment claim per month and observe the December rules and Christmas shutdown period (22nd December to 10th January)
• Update your standard form contracts to reflect the new requirements
How Crisp Law Can Help
Crisp Law is well-placed to support you in navigating these significant reforms. Whether you need assistance reviewing your contracts for compliance, advising on the expanded scope of claimable amounts, preparing or responding to payment claims, or managing performance security obligations, our team can provide practical, timely guidance tailored to your circumstance.
Please reach out to our team if you would like to discuss the implications of these amendments for your business or projects.
References:
• Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025
• Building and Construction Industry Security of Payment Act 2022 (Vic)
• Photo by Sasun Bughdaryan on UnSplash
