Overview

Significant changes to Victoria's Security of Payment legislation have taken effect earlier than expected, materially changing payment rights, adjudication processes and the treatment of performance security across Victorian construction projects.

The changes to the Building and Construction Industry Security of Payment Act 2002 (Vic) (SoP Act) under the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Amendment Act) bring the SoP Act regime in line with other States' regimes, and in some instances, go further.

We summarise the key changes that those operating in the construction industry should be aware of.

What changes from 15 April 2026

The following key changes to the SoP Act are now in effect with retrospective application to existing construction contracts and performance security already in place:

• removal of "excluded amounts" and "reference dates", meaning that claimants will be able to include disputed variations, latent conditions and time-related costs in their claims, which may be made on and from the last day of each month (or earlier if the contract permits);
• time within which to bring a payment claim for construction work or related goods and services has increased from 3 months to 6 months after practical completion;
• unfair notice-based time bar, meaning that a statutory fairness test will apply to notice-based time bars.  Adjudicators and courts may declare such provisions unfair and unenforceable where compliance is not reasonably possible or would be unreasonably onerous;
• shorter timing for progress payment, meaning that respondents will be required to pay, or release security to, the claimant within 20 business days after service of a payment or performance security claim;
• new performance security regime, meaning that a statutory right to seek the return of performance security (including bonds, guarantees and retention money) will be introduced.  A party seeking to call on performance security will be required to give at least 5 business days' notice of its intention;
• no new reasons for withholding payment, meaning that respondents will be precluded from raising new reasons for withholding payment during an adjudication.  They will be limited to those reasons already included in the relevant payment schedule; and
• introduction of a Christmas shut-down period, meaning that the definition of a 'business day' will exclude the period from 22 December to 10 January, suspending enforcement and adjudication timeframes under the SoP Act.

Practical impact

The reforms will have an immediate impact on active projects and will require adjustments to contract administration practices. In particular, parties can expect:

• increased volume and scope of payment claims;
• greater scrutiny of Payment Schedules;
• reduced reliance on contractual risk allocation mechanisms;
• direct statutory impact on performance security arrangements; and
• retrospective application to existing projects.

What you should do now

Considering the reforms are now in effect and have retrospective operation, parties should:

• review active construction contracts;
• update payment claim and schedule processes;
• reassess performance security arrangements; and
• ensure project teams are prepared for the new regime.

Given our extensive experience and expertise in Security of Payment processes throughout Australia, please contact our Infrastructure, Projects and Construction team if you require assistance.

This article was written by construction and infrastructure specialist lawyers Phillip Coady, David Wright and Pollyen Hunt.

Phillip Coady | Partner

David Wright | Special Counsel

Pollyen Hunt | Associate