The ACT has security of payment laws in place which entitle individuals who carry out construction work or supply related goods or services under certain construction contracts to receive a timely payment for their work and supplies.
The Building and Construction Industry (Security of Payment) Act 2009 (the Act) is designed to make sure that contractors and subcontractors in the construction industry are paid on time without the need for costly and lengthy litigation by allowing people to pursue outstanding payments through a rapid adjudication process.
Recent reforms to Security of Payment laws
On 11 March 2024, amendments to the Building and Construction Industry (Security of Payment) Act 2009 (the Act) took effect.
What are the changes?
The changes were made through the Building and Construction Legislation Amendment Act 2023 to support timely payment by improving the right to make regular progress claims and establishing maximum timeframes for payment.
Right to progress payments
The changes simplify when the right to a progress payment arises and what a progress payment includes. The Act has been amended to remove the concept of “a reference date.” This aligns with the recommendations from the 2018 Murray Review and NSW.
Due date for payment
The amendments have introduced a statutory term in which a progress payment becomes due for payment. Previously, the statutory term only applied when the contract was silent as to the due date for payment. This resulted in a discrepancy that saw trading contractors having to wait longer for payment than their counterparts in NSW. We want to see contractors able to seek and be paid promptly and not be left with unpaid debt.
The previous arrangements also resulted in situations where contracts provided for lengthy payment terms which could adversely impact vulnerable subcontractors.
The statutory timeframe applies except in circumstances where the contract provides for a timeframe for payment that is shorter than the statutory timeframe.
The statutory timeframe is the earlier of 15 business days after a payment claim is given by the claimant; or the day when the payment becomes payable under the construction contract.
Payment claim
The changes provide for a payment claim to be lodged on the last day of each calendar month, or an earlier day in the calendar month as specified in the contract, as long as work has been performed and/or goods supplied; or the day a construction contract is terminated. This change provides for the making of monthly payment claims. It does not require the making of monthly payment claims. In addition, the changes do not change the latest point at which a payment claim can be made. These legislative amendments have been designed to support regular payments to contractors throughout the term of the contract.
What is the impact of the changes to the adjudication process?
These changes standardise the timeframe for initiating an application for adjudication and shorten the time a claimant must wait to notify the respondent of their intention to apply for adjudication.
What construction contracts do these changes apply to?
The changes apply to both existing construction contracts and new contracts. The changes were passed by the Legislative Assembly on 29 November 2023 and commenced approximately 3 months later on 11 March 2024.
Why were these reforms made?
The reforms are designed to support contractors being paid on time and in full and were made in response to feedback from the industry and other key stakeholders on the laws and cross-border challenges.
Building and Construction Industry (Security of Payment) Act 2009
Rapid Adjudication Process
The ACT Building and Construction Industry (Security of Payment) Act 2009 (the Act)establishes a rapid adjudication process so that people who carry out construction work, or supply goods and services, can receive timely payment.
Under this process, if a person makes a payment claim and it is not paid in accordance with the process in the Act, they may apply to an authorised nominating authority (ANA) for an adjudication. The ANA appoints an adjudicator to hear disputes about account payments instead of the matter having to be heard in court.
If an adjudication goes ahead, an independent adjudicator with relevant expertise will provide an adjudication within 10 days, or a longer time if both the applicant and respondent agree. If the adjudicator's decision is, in whole or part, in favour of the applicant, the respondent has to pay the applicant an amount determined by the adjudicator. These decisions are enforceable as a judgement debt through the courts.
The adjudication process does not extinguish a party's ordinary contractual rights to seek a final resolution of a payment dispute by a court or tribunal.
The adjudication process does not apply to construction contracts that form part of a loan agreement or for residential building work if a resident owner is a party to the contract, except where the work is done under an owner–builder licence. 'Pay when paid' provisions in a contract have no effect and do not prevent a person's rights to seek a payment.
Authorised nominating authorities
Authorised nominating authorities can:
- receive adjudication applications
- nominate adjudicators
- issue adjudication certificates
The following authorities are authorised nominating authorities in the ACT:
*This list is displayed alphabetically
Organisation | Phone |
|---|---|
Authorities set their own fees and have their own panels of adjudicators. A person can ask about fees and expenses before choosing an authority.
Application for authorisation as a nominating authority
A person may apply to the Minister to be authorised as a nominating authority for a period of 3 years starting on the day the Minister gives authorisation.
Persons who wish to apply to be an authorised nominating authorities under the Building and Construction Industry (Security of Payment) Act 2009 should consider the following:
- Building and Construction Industry (Security of Payment Act 2009 (ACT) - Government information kit
- Information note - Authorised Nominating Authority - Applications [24.3 KB]
- Authorised Nominating Authority Code of Practice [44.0 KB]
Applications for authorisation should be emailed to EPSDDBuildingReform@act.gov.au.
Review of Security of Payment laws
A national review of security of payment laws was finalised in 2018 and made recommendations to improve consistency in security of payment legislation across Australia, and enhance protections to make sure contractors and subcontractors get paid on time for work they have done, regardless of which state or territory they operate in.
While many recommendations from the national review are already in place in the ACT, the ACT Government has a review of security of payment laws planned to commence later this year, which will consider ways the legislation could be improved to make the building industry fairer. The review will involve consultation with all areas of the sector and this consultation will inform the findings of the review which are planned to be presented to the ACT Government in 2025.
If you wish to be included on the consultation list for this review, email EPSDDBuildingReform@act.gov.au with the emailed titled Security of Payment laws review – consultation list.
