On 15 April 2026, the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Vic) came into force, delivering the most substantial overhaul of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) in two decades.
In this article, we set out the key reforms and what they mean for you.
Removal of excluded amounts and claimable variations
The most significant reform is the complete abolition of the “excluded amounts” and “claimable variations” regimes through the repeal of sections 10A and 10B of the Act.
Under the former Act, Victoria was the only Australian jurisdiction that prohibited the inclusion of a broad range of contractual claims in payment claims or adjudication applications. Variation entitlements (beyond those narrowly defined as “claimable variations”), latent condition costs, extension of time entitlements, and time-related costs such as delay damages were all categorised as excluded amounts. Parties seeking to resolve these disputes had no choice but to pursue arbitration or litigation, which are slower and more costly alternatives to adjudication.
From 15 April 2026, those restrictions are gone. Claimants may now include delay damages, latent condition claims, and disputed variations in their payment claims and adjudication. The Act now also permits respondents who have a contractual set-off entitlement to deduct certified liquidated damages from the amount proposed to be paid in a payment schedule.
A new statutory right to claim release of performance security
The amended Act establishes a dedicated statutory regime under Division 1A. This gives any party who has provided a performance security under a contract the right to claim its release through the security of payment framework.
The definition of ‘performance security’ is broadly defined to include both performance bonds (including guarantees) and retention money. This puts the long-running controversy as to whether a claim for retention money constituted a claim for ‘construction work’ to rest.
How the new regime works
A performance security claim may be served no earlier than the earliest of at least 20 business days after the end of the relevant defects liability period (DLP) for the construction work to which the security relates or on or after the day (or the occurrence of an event) specified in the construction contract.
A performance security claim may be served no later than the latest of the day determined under the construction contract as the latest day for service or the last day of the named month following the named month in which the final DLP ends.
Where the contract does not expressly provide for when a DLP ends, a deemed DLP applies, running from practical completion until any required defect rectification is complete.
If a respondent fails to serve a performance security schedule within the earlier of the contractually required time and 10 business days after the claim is served, they become liable to release the full amount claimed. The claimant may then seek a court order compelling release or proceed directly to adjudication.
Any contract term that requires payment of a progress payment or the release of performance security later than 20 business days after the relevant claim is served is void to that extent.
Notice before recourse
Section 17H requires a party to serve at least a five business days’ (or a longer period if provided for in the contract) notice of their intention to have recourse to security before having recourse to the whole or any part of a performance security. A notice must:
- identify the construction contract and the contractual provisions relied on;
- state the amount of security to which the party intends to have recourse; and
- describe the circumstances said to justify that recourse.
Notice-based time bar fairness test
A notice-based time bar can be found to be “unfair” in relation to a particular contractual entitlement under the new section 13A, where compliance with the provision is not reasonably possible or would be unreasonably onerous.
The power extends to adjudicators, courts, arbitrators, and expert determiners. Common examples of notice-based time bar clauses that may be scrutinised under this provision include extension of time notices, variation notices, and notices claiming latent condition costs.
Notably, a declaration of unfairness does not permanently invalidate the clause. It merely has no effect in relation to the particular entitlement in question. The clause may continue to operate in other circumstances or proceedings.
Reference dates abolished
The often-contested concept of “reference dates”, the mechanism under the old Act that determined when a payment claim could be made, has been abolished and replaced with a simpler monthly entitlement framework.
Under the new Act:
- A claimant may serve:
- one payment claim per calendar month; and
- a payment claim on or following termination of a contract.
- Contracts that purport to require payment claims to be made less frequently than monthly are of no effect to that extent. However, the Act expressly allows the parties to agree to more frequent claims.
- A payment claim served before the relevant date for submission of a payment claim is not invalid. It will be taken to have been served on the earliest date, and the respondent’s time to serve a payment schedule does not run until that date.
- The last date which no further payment claim may be served is the later of the date (if any) specified in the contract, or 6 months after practical completion of all construction work or supply of all goods and services under the contract. This replaces the previous 3-month time limit.
Capped payment terms
The Act now voids any contract term that requires payment of a progress payment or the release of performance security later than 20 business days after the relevant claim is served.
Where the contract is silent on when payment is due, the default position is that a progress payment becomes due 10 business days after the earliest day on which the payment claim could have been served. In some circumstances, this means the due date may fall before the payment claim is actually served.
Christmas shutdown period
The definition of “business day” has been updated to exclude the period from 22 December to 10 January in the following year. This formally recognises the longstanding practice of the construction industry to shut down over the Christmas and New Year period, and aligns Victoria with other Australian jurisdictions.
For payment claims relating to work carried out between 1 and 21 December, the claim may be served from 22 December of that year. For work carried out between 22 and 31 December, the payment claim may be served from 31 January of the following year.
New Reasons Prohibited in Adjudication Responses
Under the previous Act, respondents could introduce new reasons for withholding payment in their adjudication response, even where those reasons had not been set out in the payment schedule. This was a uniquely Victorian feature of the regime.
That flexibility has now been removed. A respondent’s adjudication response must not contain any reason for not paying the whole or part of a claimed amount if that reason was not set out in the payment schedule served on the claimant (or in the performance security schedule, for performance security claims). The same restriction applies to any further submissions made during adjudication at the adjudicator’s request.
A note on transitional provisions
The Part 2 amendments (including removal of excluded amounts and the new performance security and time bar provisions) apply to all construction contracts, regardless of when entered into.
The Part 3 amendments (governing payment claims, payment schedules, and adjudication) do not apply to payment claims served before 15 April 2026, or to adjudication applications made but not yet determined as at that date. Those matters continue under the old Act.
This means that parties with claims or applications already in progress need to determine carefully which version of the Act governs their dispute and seek advice accordingly.
What you should do now?
If you are a contractor or subcontractor
- Audit your contracts for compliance with new sections under the Act like time bar clauses and payment schedule provisions, especially including contracts in force before the amendments took effect.
- If you are contemplating a delay or latent condition claims, start working on this early as briefing experts and quantity surveyors early as this takes time. The window for lodging an adjudication application now just 10 business days, so you need to be on top of this!
- Include performance security and retention in your next claim.
- Track your monthly claim entitlement and ensure you are only serving one payment claim per month, and that final claims served at the end of the relevant month (or within six months of practical completion).
- Be aware of the Christmas period with 22 December to 10 January no longer considered ‘business days’ under the Act.
If you are a principal or head contractor
- Review and update your standard-form contracts and revise any non-compliant provisions.
- Understand the range of possible claims that can be brought by a contractor, especially delay, latent condition, and variation claims previously excluded in Victoria.
- Pay extra attention in drafting payment schedules as there is no more opportunity to provide new reasons in adjudication.
- Check your time bar clauses because if they are unreasonably onerous, they can be set aside.
- Make sure you observe 5 business days’ notice before you call on your security.
What’s next?
The reforms are set to make a significant shift to the rights and obligations of parties under Victorian construction contracts. We will continue to see the full implications of these changes play out in adjudications and courts as these amendments are applied.
For more information about how these changes affect you, please get in touch with Elena Stojcevski.
