Security of payment frequently asked questions

Do the laws apply to the residential sector?

If you contract directly with a person (not a company or strata scheme owners corporation) who lives or intends to live where the work is to be conducted and the work is:

  • residential building work where the total cost of labour and materials is more than $5,000 or
  • electrical wiring work or
  • plumbing, draining and gas fitting work or
  • air conditioning and refrigeration work (except plug-in appliances)

then the Act does not apply to you.

How do I get my money?

To be paid for construction work and services you have performed, put in a payment claim.

Who signs/declares that subcontractors have been paid what is due and payable?

A company director or other officers of the organisation authorised to make a declaration on behalf of the head contractor.

What subcontractor payments must be included in the supporting statement?

You must include all payments due and payable at the time you submit a claim for payment to the principal.

Are amounts in dispute considered due and payable?

No. However, in the supporting statement you must refer to any subcontractors for which an amount otherwise due and payable is in dispute.

Can a head contractor only pay subcontractors after receipt of payment from the principal?

No. The Act prohibits ‘pay when paid’ provisions in construction contracts. The provisions of the Act (section 34) override any conditions in a construction contract that contradict the Act.

When you submit a claim for payment to the principal, if an amount is due and payable to a subcontractor that you have engaged then you must declare that all such payments have been made.

Who enforces the requirements?

The Act sets out the role and powers of the Secretary of the Department of Customer Service, which is delegated to officers from Fair Trading to investigate compliance with the Act. Authorised officers may require a company or a person to provide information and documents relating to supporting statements or retention money trust accounts.

What are the penalties for not complying with the supporting statement requirements?

There is a maximum penalty of $22,000 for failing to provide a supporting statement with a payment claim to a principal. Maximum penalties of $22,000 and/or three months imprisonment apply to knowingly providing false or misleading information in that statement.

How can I make or respond to a claim made under the Act?

The procedures and time frames for making a claim and responding to a claim are under Part 3 of the Act. Go to our responding to an adjudication claim page for more information.

What are the practical implications for a respondent in the payment chain?

If you are a respondent to a payment claim, you must clearly understand your obligations. A respondent must give the claimant a payment schedule within 10 business days of receiving a payment claim. If, as the respondent, you fail to provide a payment schedule, you are liable for the total amount claimed. If you do not provide a payment schedule, you may find yourself subject to court proceedings without:

  • recourse to any cross-claim against the subcontractor; or
  • being able to raise any defence relating to the construction contract.

What should a respondent to a payment claim do?

Provide a payment schedule and pay the claimed amount within the timeframe. If you do not intend to pay the full amount of a payment claim under the Act, you should issue a payment schedule to the claimant no later than 10 business days after you receive the claim. Keep a careful record of the date of receipt of the payment claim and the date when the claimant must receive your payment schedule. If you don’t serve a payment schedule within time, you are liable for the amount claimed. If the claimant sues for recovery of that amount, you cannot raise any defence based on the construction contract or raise any cross-claim.

I am a head contractor, do I need to keep retention money in a trust account?

You only need to keep retention money in a trust account if your contract is valued $20 million or more. If your contract wasn’t originally valued over $20 million, but has then increased over that threshold, you only need to keep retention money in a trust account for the contracts entered into after the project value exceeds the $20 million threshold.

What do I have to do if I open a retention money trust account?

After you open a retention money trust account, you have to notify Fair Trading of the accounts details, the account name and the opening balance. Within three months of the end of the financial year, you also have to provide Fair Trading with an account review report and a retention account statement (this statement is found in Schedule 2 of the Regulation). Go to our retention money for more information.

Reference dates and payment claims

You can only make one claim under the Act for each reference date. The reference date is either the date stated in the contract for making claims or, if there is no date, it is the last day of each month.

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