Victoria has taken a decisive step toward reforming construction payment laws, with the long-awaited Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 (Bill) read for a second time in Victoria’s Parliament on 11 September 2025.
The Bill proposes significant changes to the current Building and Construction Industry Security of Payment Act 2022 (Vic) (Act) and aims to bring Victoria’s payment regime in line with those of other States and Territories.
If passed, the Bill will significantly reshape how construction contracts are managed in Victoria.
This initial package of reforms includes the 16 Inquiry recommendations fully supported by the Victorian Government in October 2024, with the remaining recommendations to be addressed after further consultation with stakeholders. Read more about this background in our previous article.
The reforms are expected to come into effect by 1 September 2026 at the latest, and will apply retrospectively to construction contracts made before that date.
Key changes to the Act include:
Excluded amounts and claimable variations
The Bill removes the excluded amounts and the non-claimable variations regime. This will allow contractors to claim progress payments based on the value of the construction work that they have performed. This broadens what a contractor or subcontractor is able to claim as monies owing in an adjudication application.
Reference dates
The Bill proposes to remove the concept of reference dates in determining when a payment claim can be made. If implemented, these changes will grant contractors the right to submit a payment claim on, and from the last day of the month. Contractual clauses that have progress payment dates which are less frequent than monthly will be invalid.
A contractor’s right to submit a final payment claim will not be affected by contract termination. Furthermore, the Bill expands the time limit in which a final payment claim can be submitted from three to six months. This amendment aims to eliminate the complexity associated with calculating a reference date.
Shutdown period
In the current Act, there is no provision for a shutdown period over Christmas. The Bill proposes that the period from 22 December to 10 January be excluded from the definition of business day. The construction industry typically closes over this period, therefore, these amendments aim to promote procedural fairness and to align Victoria with other jurisdictions.
New reasons
The Act currently allows for adjudicators to consider new reasons for withholding payment that were not included in the payment schedule. This will no longer be the case. The proposed amendments prevent respondents from submitting any new reasons for withholding payment which were not included in the payment schedule and, consequently, will remove the existing two business-day period in which the claimant was to respond to the respondent’s new reasons.
Security
The Bill allows claimants to claim the release of whole or part of performance security. This will provide adjudicators with the power to determine if security should be released to a claimant (including the date it should be returned) upon the satisfactory completion of their contractual obligations.
A claimant’s claim for the release of performance security may be served no earlier than the earliest of, a date that is at least 20 business days after the end of the relevant defects liability period or, on or after a date specified in the construction contract.
Unfair time bars
If implemented, the Bill will allow adjudicators, a court, arbitrators, and experts, to declare that a notice-based time bar clause in a construction clause is unfair if it is found to be unreasonably onerous or not reasonably possible. If a notice-based time bar is found to be unfair, it will have no effect on the entitlement that is the subject of an adjudication or proceeding.
The Bill outlines the matters that an adjudicator must consider when determining if the notice-based time bar is unfair. For example, this includes when and how the notice must be given, the relative bargaining power of each party, and whether the party required to give notice had the commercial and technical competence of a reasonably competent contractor. Of note, this position is similar to the WA legislation and reflects a significant departure from the other Eastern states.
If passed, this amendment will likely have significant consequences on the contractual risk allocation agreed between the parties and could nullify strict compliance with onerous time bars. Relevantly, the proposed unfair time bar regime is broader than the current unfair contracts legislation as there is no monetary threshold to which the Bill applies.
Simplified enforcement process
The Bill simplifies the process for recovering an adjudicated amount. A claimant who has an adjudication certificate may file it as a judgment for a debt due in a court of competent jurisdiction.
Education
The Bill expressly requires the Building and Plumbing Commission to provide education on the Act and the changes the Bill is set to implement. This education involves providing information and necessary materials to persons who carry out construction works or who supply related goods and services under a construction contract, and relevant authorised nominating authorities and adjudicators, regarding the Act and the changes that the Bill will implement.
Next steps
The latest date that the Bill is set to come into operation is 1 September 2026. With the introduction of the Bill, it is likely that Victoria will have a considerable increase of adjudications under the Act. Please get in touch with our Hamilton Locke Construction team if you have any queries or would like to discuss further.
