The first major change to the Victorian security of payment scheme since 2006 is on its way, with the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 receiving Royal Assent on 13 November 2025. This Act is in response to the 2023 Legislative Assembly Environment and Planning Committee Inquiry into employers and contractors who refuse to pay their subcontractors for completed works, and the Government’s response in 2024.
The amending Act will come into effect on 1 September 2026, unless proclaimed earlier. The changes could come into effect as early as March 2026.
Importantly, when the Act comes into effect, it will apply to all construction contracts entered into before, on or after the commencement date.
In brief, the significant changes that the Act will introduce include:
- The first and second class variation regime abolished
- Excluded amounts abolished
- Reference dates abolished
- New express right to claim for return of cash retention, and for the return of performance securities
- No “new reasons” for withholding payment in adjudication responses
- Construction industry Christmas shutdown
- Extended time to respond to a Section 18(2) Notice
- Payment terms limited to 20 business days
- Time to make a claim extended (from 3 months to 6 months)
- Notice-based time bars may be declared to be unfair and of no effect
- Service of adjudication application and adjudication response on the other party
- Time for an adjudicator to complete their determination
The first and second class variation regime abolished:
The current Act places significant restrictions on variations that a claimant may claim, and an adjudicator may determine. The amending Act removes that restriction so that all variations can be included in a payment claim and determined by an adjudicator.
Excluded amounts abolished:
Under the current Act, claimants cannot claim, nor obtain a determination of claims for:
- Any variation that is not a claimable variation
- Latent conditions
- Time-related costs
- Changes in regulatory requirements
- Damages
The amending Act removes the excluded amounts regime so that all of those claims will be able to be made, and determined by an adjudicator.
Reference dates abolished:
Under the current Act, a payment claim must have a valid “reference date”. This is the date stated in or calculated in accordance with the contract, that a payment claim may be made. The Act provides default reference date provisions where the contract does not include express provision.
The reference date regime can be particularly technical, and failure to understand and/or strictly comply with the requirement has caused payment claims that would otherwise be successful, to be found invalid.
The amending Act removes the “reference date” regime and introduces a right to claim payment:
- On and from the last day of the month
- On and from 22 December for work undertaken from 1 December to 21 December in the same year
- On and from 31 January for work undertaken from 22 December to 31 December in the previous year
- On and from the date of termination, if the contract is terminated
- On and from a date provided for in a contract
The amending Act also provides that a payment claim that is served early is not invalid.
Express right to claim for return of retention, and for the return of performance securities:
Under the current Act, claims for return of cash retention have been very difficult and there has been no ability to claim for the return of performance securities.
The amending Act introduces an express right to make a claim for the return of retention and for the return of performance securities (cash, guarantee or bond), and:
- Establishes a regime of “performance security claim” and “performance security schedule”
- Confirms that a claim for the return of a performance security may be made as a stand alone claim, or in conjunction with a claim for progress payment
- Gives adjudicators the power to determine that performance security must be returned, when and what portion
- Expressly prohibits parties from contracting out of these provisions of the Act
Further, the amending Act requires a party who wishes to have recourse to performance security to provide written notice of its intentions do so at least 5 business days prior to acting.
No “new reasons” for withholding payment in adjudication responses:
The current Act allows a respondent to include “new reasons” for withholding payment in their adjudication response, that were not in the payment schedule.
The amending Act sets out that a reason for withholding payment in an adjudication response, that was not included in the payment schedule (or performance security schedule) cannot be taken into account by an adjudicator.
Construction industry Christmas shutdown:
The amending Act introduces, for the first time in Victoria, a Christmas shutdown period between 22 December and 10 January the following year.
Extended time to respond to a Section 18(2) Notice:
The amending Act changes the time for a respondent to provide a payment schedule in response to a Section 18(2) Notice (notice of intention to apply for adjudication). It has been increased from 2 business days to 5 business days.
Payment terms limited to 20 business days:
The amending Act mandates that a term or provision in a contract has no effect to the extent that it provides for payment to be made more than 20 business days after a payment claim is served (or is taken to be served).
Time to make a claim extended (from 3 months to 6 months):
The current Act allows a payment claim to be made within 3 months of the last reference date.
The amending Act introduces an extended period that is 6 months after the practical completion of all construction works, or the supply of all related goods and services, under the construction contract.
For performance security claims, a claim may be served up to the last day of the month, in the month after the end of the defect liability period.
Notice-based time bars may be declared to be unfair and of no effect:
For the first time in Victoria, the amending Act will give a decision maker the ability to declare a notice-based time bar to be unfair and of no effect if compliance with the time bar is “not reasonably possible” or would be “unreasonably onerous”.
The decision makers empowered by this provision include an adjudicator, a court, an arbitrator or an expert appointed by the parties.
The amending Act sets out the matters that a decision maker must take into account when deciding whether a notice-based time bar is unfair.
Service of adjudication application and adjudication response on the other party:
The amending Act introduces an express obligation on claimant and respondents to serve a copy of their adjudication application and adjudication response on the other party within 3 business days of serving it with the ANA or adjudicator.
Time for an adjudicator to complete their determination:
The amending Act provides that the adjudicator must complete their determination within 10 business days after service of their notice of acceptance or the latest day a respondent could have served an adjudication response.
With the agreement of both parties, the time can be extended by up to a further 20 business days (maximum of 30 business days).