Security of Payments Act Victoria (VIC):  What Contractors Need to Know

Understand your rights and obligations under Victoria's Security of Payment laws to get paid on time and protect your cash flow.

In Victoria, subcontractors and suppliers often face long waits for payment, even when work is completed on time and to spec. The Building and Construction Industry Security of Payment Act 2002 was introduced to reduce that risk and ensure a fairer, faster way to resolve payment disputes.

The Act gives claimants the legal right to claim and recover progress payments without relying on lengthy or expensive legal processes. It also lays out strict timeframes, enforcement options, and a clear path to adjudication if payment is delayed or withheld.

Key Rights Under Victoria’s Security of Payment Act

Under the Security of Payment Act (SOPA), eligible claimants in Victoria are entitled to:

• Progress payments: Payment can be claimed for work done or goods/services provided, even if the contract doesn’t expressly allow for it
• Receive a payment schedule: Respondents must reply to payment claims within 10 business days (or sooner, if the contract specifies), outlining what will be paid and why any amount is withheld
• Escalate to adjudication: If payment is late or disputed, you can apply for adjudication without going to court
• Recover unpaid amounts: Scheduled or adjudicated amounts not paid by the due date can be recovered as a debt
• Automatic liability if no schedule is issued: If the respondent fails to provide a payment schedule on time, they’re liable for the full claimed amount
• Suspend work: You may suspend work if unpaid, without liability for resulting delays.

The Act also prohibits “pay when paid” clauses. Payment cannot be made conditional on the respondent receiving funds from someone else.

Who Can Make a Claim?

The Security of Payment Act in Victoria allows contractors, subcontractors, and suppliers to claim payment for work done or goods provided under a construction contract. This includes:

• Head contractors claiming against principals
• Subcontractors claiming against head contractors
• Suppliers and consultants providing construction-related goods or services
• Professionals such as architects, designers, and surveyors

Equipment and plant hire companies

What Work Can be Claimed?

The Security of Payment Act (VIC) allows contractors, subcontractors, and suppliers to claim payment for a wide range of construction work and related services carried out under a contract in Victoria.

The Act is deliberately broad to ensure wide industry coverage.

The SOPA also outlines what kinds of work can’t be claimed, which include:

• Domestic building contracts between builders and homeowners
• Work related to oil, gas, or mineral extraction
• Employment contracts (i.e., claims made by employees)
• Financial services contracts, such as those tied to loans, guarantees, or insurance
• Contracts not tied to actual work done or goods/services supplied
• Work performed or goods supplied outside Victoria (in which case, the relevant state or territory legislation applies

Timeframe and Deadlines

Strict timing rules underpin the Security of Payment Act (VIC). Missing a deadline can reduce your legal options, trigger automatic liability, or cause a claim to fail entirely.

Delays in payment can also arise from inconsistent communication and slow adoption of technology across project teams

Understanding the timing requirements under the Victorian Act and how they differ from those in other states is essential for protecting your payment rights.

General Payment Rules Under SOPA (VIC)

Under Section 12 of the Building and Construction Industry Security of Payment Act 2002, a progress payment becomes due and payable on:

• The date stated in the contract, or
• If the contract is silent, 10 business days after a payment claim is served

Serving a Payment Claim

The right to serve a payment claim in Victoria arises on each reference date, a term defined in the Act. A reference date is either:

• As set out in the contract, or
• If not specified, every 20 business days from when work or supply first occurred

Claims must be served:

• Within the period stated in the contract, or
• If not specified, within 3 months after the reference date

Only one payment claim can be made per reference date. However, unpaid amounts from previous claims can be rolled into a later claim.

Responding with a Payment Schedule

Respondents must serve a payment schedule:

• Within 10 business days of receiving the claim, or
• Within the time required by the contract, whichever is earlier

The schedule must state how much (if anything) will be paid, and give reasons for any withheld amount.

Applying for Adjudication

If a payment schedule is served but the respondent underpays or does not make payment by the due date, claimants must apply within 10 business days of receiving the payment schedule.

If no payment schedule is provided and no payment is made, the claimant must notify the respondent of their intention to apply for adjudication within 10 business days of the due date,  and allow 2 business days for the respondent to issue a payment schedule. 

If no schedule is received, the claimant can apply for adjudication within 5 business days of that 2-day window closing.

After Adjudication

If the adjudicator determines an amount is payable, the respondent must pay:

• Within 5 business days of receiving the adjudication decision, or
• By a later date set by the adjudicator (if applicable)
  

Failure to pay enables the claimant to pursue enforcement through the courts or suspend work without breaching the contract.

The Payment Claim Process

The Security of Payment Act (VIC) sets out a clear process for claiming payment and resolving disputes. Each step must be followed carefully to preserve your rights under the Act.

Successfully navigating the payment claim process often depends on having solid business and administrative skills, which many contractors overlook.

1. Prepare the Payment Claim

   The claimant must:
   Identify the construction work or goods/services being claimed
   State the claimed amount
   Clearly state that the claim is made under the Building and Construction Industry Security of Payment Act 2002 (VIC)
   Ensure only one claim is served per reference date (though unpaid amounts from earlier claims can be included)

2. Respondent Issues a Payment Schedule

   The respondent may reply with a payment schedule that:
   
   Identifies the claim
   States how much they will pay
   Explains any difference between the claimed and scheduled amount
   
   Failure to serve a valid payment schedule triggers liability for the full claimed amount.
   

3. Take Action if Payment isn’t Made

   If the respondent doesn’t pay, the claimant may apply for adjudication. Alternatively, the claimant may recover the amount as a debt in court.
   
   In some cases, the claimant must first notify the respondent of their intent to adjudicate, allowing a brief window to issue a payment schedule.
   

4. Adjudication (if needed)

   An Authorised Nominating Authority (ANA) appoints an adjudicator to review the claim and issue a binding decision. Only respondents who provided a payment schedule may submit an adjudication response.

5. Enforce the Decision

   If the respondent fails to pay the adjudicated amount, the claimant may suspend work (having given notice) and request an adjudication certificate and file it in court.
   
   In limited cases, the claimant can claim payment directly from the respondent’s principal.
   

Adjudication

Adjudication is a fast, low-cost method for resolving payment disputes under the Security of Payment Act (VIC). It allows contractors and suppliers to recover unpaid amounts without going to court, though it’s often used as a last resort due to its potential impact on business relationships.

A claimant can apply for adjudication if:

• The respondent proposes to pay less than the amount claimed
• The respondent agrees to pay but fails to do so by the due date
• No payment schedule is provided, and the full claimed amount remains unpaid

In cases where no payment schedule is given, the claimant must first issue a notice of intent before proceeding to adjudication. This gives the respondent a final 2 business days to respond.

Use the Security of Payment Act to protect your right to timely payment in Victoria.

Victoria’s Security of Payment Act helps contractors, subcontractors, and suppliers get paid faster by simplifying payment claims and disputes. Following the Act’s deadlines and steps closely will keep cash flowing and your projects moving.

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