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Security of Payment Regulation 

Comments closed on 16 January 2015 

What happened? 

In 2014, the NSW Government proposed several changes to the Building and Construction Industry Security of Payment Regulation. These reforms aimed to better protect subcontractor retention monies and strengthen transparency in relation to payments to subcontractors while minimising red tape.

NSW Fair Trading released for public comment the draft Building and Construction Industry Security of Payment Amendment (Retention Trust Money Account) Regulation 2014.

Following consultation, Regulation amendments were made and started on 1 May 2015.

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What are the main changes?  

New requirements apply to contracts between head contractors (or principals) and subcontractors for non-residential building projects worth over $20 million. The changes include:

  • requiring head contractors to deposit subcontractors’ retention money into approved accounts with authorised deposit-taking institutions (ADIs)
  • retention monies only being available for the purposes specified in the contract between the parties
  • the maximum penalty for breaches of the Regulation will be $22,000
  • account holders needing to lodge an annual audit report for each account they hold
  • increased investigative powers for compliance officers so that they can better review and seek information on individual accounts.

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Why was this needed?  

Changes to the Regulation deliver further reform consistent with the Collins Inquiry’s recommendations and the original intention of the Security of Payment Act.

In August 2012, the NSW Government commissioned an Independent Inquiry into Construction Industry Insolvency. The Collins Inquiry was initiated following the rising number of construction company collapses that left thousands of suppliers and subcontractors more than $1 billion out-of-pocket.

In late 2013, the Building and Construction Industry Security of Payment Act 1999 was changed to ensure prompt payments for subcontractors. Three major changes to the Security of Payment Act have come into effect:

  • establishing prompt payment provisions
  • requiring a head contractor to give a principal a written statement that all subcontractors have been paid when making a claim for payment
  • new provisions to allow contractors to be fined or jailed for providing a false or misleading statement in order to get paid.

For more information, visit the Security of payment page. 

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What is happening now? 

We are currently undertaking a full review of the Building and Construction Industry Security of Payment Act 1999. This will enable a comprehensive revision of security of payment laws. For further information, refer to the Security of Payment laws page.

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