Security of payment
Subcontractors deserve to be paid on time. Their livelihood depends on it.
If you’re owed money by a code covered entity , the ABCC may be able to help.
On this page:
- where you can find information about security of payment laws in your region.
- what code covered entities must do to comply with security of payment requirements in the Code .
- how the ABCC can help if you’re owed money by a contractor that does not comply with these requirements.
What is ‘security of payment’?
In general terms, ‘security of payment’ refers to a building contractor’s right to receive payments that are due as outlined in their contract. For example, a head contractor must pay a subcontractor’s progress payments on time.
Each state and territory has its own security of payment laws that provide a rapid statutory mechanism for resolving payment disputes on an interim basis. This is known as adjudication.
While the adjudication schemes in each state and territory provide similar protections, there are differences in how the laws operate, the steps you need to follow and the strict timeframes required for adjudication applications—so it’s important to understand how the law works in your region.
For information about the relevant state and territory agencies that regulate the security of payment laws in your region, see further information and help.
Security of payment and the Code
The ABCC is responsible for monitoring the security of payment requirements in the Code for the Tendering and Performance of Building Work 2016 (Code).
The ABCC is also a member of the national Security of Payments Working Group.
However, it’s important to note that the Code doesn't apply to all building contractors.
Who’s covered by the Code?
The Code covers contractors and subcontractors who have expressed interest in or tendered for Commonwealth funded building work since 2 December 2016. These contractors are known as code covered entities.
Once you become a code covered entity, you must comply with the security of payment obligations in the Code on all building work awarded to you from then on, including private projects.
Where a code covered entity does not comply with the Code, the ABCC may recommend that the entity is sanctioned by the Minister. This could lead to the entity being excluded from Commonwealth funded building work for up to twelve months.
Contractor and subcontractor obligations under the Code
Contractors and subcontractors that are covered by the Code must:
- comply with state and territory security of payment laws
- not coerce or unduly pressure or influence a contractor, subcontractor or consultant not to exercise rights under state or territory security of payment laws or to exercise such rights in a particular way
- report disputed or delayed progress payments to the ABC Commissioner
- ensure payments that are due and payable are made in a timely way and not unreasonably withheld
- have documented dispute settlement processes detailing how disputes about payments to subcontractors will be resolved
- comply with the dispute settlement process and any determination made under such a process
- ensure disputes about payments are resolved in a reasonable, timely and co-operative way
- comply with any project bank account or trust arrangement that may apply on a Commonwealth funded project.
When the ABCC can help
If you're engaged on a project by a contractor who does Commonwealth funded building work we may be able to help you—because that business may be required to comply with security of payment requirements under the Code on many of their projects (a code covered entity ).
A code covered entity that breaches the Code may find that the ABCC recommends that they are not able to tender for Commonwealth funded building work.
The ABCC’s intervention may assist you as the ABCC can seek that a company in breach of the Code voluntarily rectify its Code breach, which may include making overdue payments. However, we can’t order an entity to take any action or make any payments in the same way that a Court can.
Please note, the ABCC has no jurisdiction and can’t help you if the company is not covered by the Code on the project for which you’re owed money. A company may be a code covered entity on some projects but not others as the Code commenced in December 2016 and does not operate retrospectively.
Example: Security of payment
Yasmine and Zhen run YZ Plumbers Pty Ltd, which employs 10 staff. YZ Plumbers subcontracts for different head contractors and is covered by the 2016 Building Code.
Yasmine and Zhen are concerned because the head contractor has not paid them on time for the work they are performing on their current job. They are worried that they may not be able to pay their staff, and that if they complain they might lose future work from that head contractor.
What should Yasmine and Zhen do?
As a Code covered entity, YZ Plumbers must report disputed or delayed progress payments to the ABCC. So must the head contractor if it is covered by the Code.
Anyone conducting building work should be able to seek the recovery of unpaid monies without fear of reprisal. If Yasmine or Zhen feel that they’re being unduly pressured, influenced or coerced not to make a claim for payment or access to adjudication, they should report this to the ABCC.
How the ABCC can help
There are a number of requirements placed on code covered entities that are intended to help ensure that progress payments are made in a timely manner.
If you’re a subcontractor who’s owed money, we can help you identify if the contractor who owes you a progress payment is a code covered entity.
Following this, we can help with the following situations:
- Subcontractors being unduly pressured, influenced or coerced not to exercise their rights under security of payment laws.
- Subcontractors not being paid monies in a timely manner that are legally due and payable; for example, where subcontractors have:
- submitted a valid progress payment claim* and have not been paid in accordance with a payment schedule* or a notice of dispute*
- submitted a valid progress payment claim*, and a payment schedule or notice of dispute* has not been submitted in response, and the amount in the payment claim has not been paid by the payment date
- not been paid in accordance with an adjudicator’s determination
- not been paid an amount certified by a Principal (or Superintendent) under a contract
- A documented dispute settlement process is not being complied with.
- Security of payment laws have not been complied with.
If any of the situations outlined above apply to you, please report it to the ABCC by submitting the security of payment reporting form.
For assistance, see further information and help.
*A “payment claim”, a “payment schedule” and a “notice of dispute” are terms defined under security of payment laws. These laws differ in each region.
Code covered entities must report any disputed or delayed progress payments to the ABC Commissioner and relevant funding entity (if any) as soon as practicable after the date on which the payment falls due.
You can report to the ABCC by completing and submitting the security of payment reporting form.
The obligation to report disputed or delayed progress payments is a requirement on all code covered entities, regardless of whether you’re the claimant or respondent.
When are disputed or delayed payments reportable?
An obligation to report a disputed or delayed payment arises as soon as practicable after the date on which the payment falls due.
An obligation to report a disputed or delayed payment may arise where:
- An amount is certified by a Principal (or Superintendent) under a contract and not paid within the contractual timeframe.
- An amount is specified in a payment schedule/notice of dispute issued under the security of payment laws and not paid by the date prescribed by those laws.
- Other than in Western Australia and the Northern Territory, no payment schedule/notice of dispute is issued in response to a valid payment claim and the full amount of the payment claim is not paid by the date prescribed by the security of payment laws.
- An adjudicator makes a determination under the relevant state and territory security of payment legislation and the adjudicated amount is not paid by the date prescribed by the security of payment laws.
- A third party such as a court, arbitrator, or expert issues a binding determination and the amount determined is not paid in accordance with the determination.
When do I have to comply with this reporting requirement?
To allow contractors time to set up processes to comply with this reporting requirement, this transitional process will apply:
- From 16 July to 31 August 2018 (“the transition period”) — the ABCC will focus on educating code covered contractors about the revised definition of the mandatory reporting requirements and ensuring they rectify any failures to report.
- From 1 September 2018 - a failure to report under the revised definition will be responded to in the same way as any other breach of the Code.
- Throughout the transition period, the ABCC will receive and act upon any report, complaint or enquiry captured by the revised definition and enforce any breaches of the security of payment provisions of the Code in the usual manner (except failures to report).
Head contractors on Commonwealth funded building projects may wish to amend their WRMP in line with the new reporting requirement. WRMPs amended to accommodate the new reporting requirement only, do not need to be reviewed by the ABCC. All other amendments to WRMPs must be approved by the ABCC.
I’m owed money, but I’m not a code covered entity. What should I do?
You can still report any disputed or delayed payments to the ABCC.
Even if you’re not a code covered entity , your client may be—and we can help you determine if they are. You should also contact your relevant state or territory agency so you don’t miss out on your right to access an adjudication scheme.
For contact details, see further information and help.
Anyone conducting building work should be able to seek the recovery of unpaid monies without fear of reprisal or consequences.
Under state and territory security of payment laws, you may be entitled to apply for independent adjudication of disputed progress payments.
The Code prohibits code covered entities organising or taking action with the intent to coerce you, or unduly pressure or influence you, to exercise or not to exercise your rights under these laws or to exercise them in a particular way.
The Code also prohibits code covered entities from threatening to organise or take such action.
For example, a code covered entity must not threaten the loss of future work if you say that you are going to refer a progress payment claim to adjudication under the security of payment laws.
What should I do if I’m being pressured?
If you feel that you’re being unduly pressured, influenced or coerced not to make a claim for payment or to access adjudication, you should report this to the ABCC.
You can do this by submitting the security of payment reporting form.
If the company is a code covered entity, the ABCC may be able to help you.
For details about the adjudication timeframes in your state or territory, including a checklist of state and territory timeframes, see further information and help.
In addition to your rights under security of payment laws, you can rely on a dispute settlement process (DSP) to resolve disputes about progress payments.
Code covered entities must:
- have a documented DSP that details how disputes about payments to subcontractors will be resolved
- ensure the DSP includes a referral process to an independent adjudicator for determination
- comply with the process and any determination.
If you are concerned that a DSP is not being followed, please report this to the ABCC by completing and submitting the security of payment reporting form.
Compliance with adjudication determinations
State and territory security of payment laws provide rapid statutory mechanisms to resolve payment disputes on an interim basis. These mechanisms allow an adjudicator appointed under security of payment laws to determine progress claims in certain circumstances. The state and territory security of payment laws require an adjudicated amount to be paid by a specified date.
For relevant state and territory agencies that can provide details of adjudicators, please see further information and help.
When can I access adjudication under state and territory security of payment laws?
You may be entitled to access adjudication under your relevant state or territory security of payment law, whether or not this right is included in your contract. The security of payment laws cannot be excluded by a contract. However, please be aware of the specific timeframes for adjudication applications.
To access adjudication, you must ensure that you’ve complied with steps under the relevant law, such as submitting a valid payment claim.
For example, most states and territories require a valid payment claim to:
- identify the construction work or related goods and services
- specify the claimed amount of the progress payment
- identify that the document is a payment claim under the relevant security of payment law
- be served on the party who is, or may be, liable under the contract to make a payment.
For details about the rules in your state or territory, please see further information and help, which includes a summary checklist of the timeframes and requirements in each jurisdiction.
What if the determination isn't complied with?
Code covered entities must comply with state and territory laws, which includes complying with determinations made by adjudicators.
If you think a determination isn’t being complied with, you can report this to the ABCC by completing and submitting the security of payment reporting form.
We’ll assess whether the contractor who owes money is a code covered entity and, if so, whether they have breached the Code. If they have, we may be able to seek voluntary payment of due monies in a process called voluntary rectification. If they are not a code covered entity, the ABCC will not be able to assist and you will need to consider seeking legal advice. See further information and help for details of the state and territory agency that looks after security of payment laws in your region.
A code covered entity may face consequences for breaching the Code, such as not being able to tender for Commonwealth funded building work, if the ABC Commissioner recommends that the Minister sanction that company.
If you’re a code covered entity, you are required to report disputed or delayed progress payments to the ABCC. If you’re owed money, you may wish to seek legal advice about the other remedies available to you to recover outstanding money.
Payment terms in contracts
If you’re a contractor, please be aware that payment terms in your contract can impact cash flow to your business. They can also impact your ability to recover retention monies.
It’s a good idea to get legal advice before you sign a contract or when you are seeking to recover monies owed, to make sure that the payment terms in the contract are lawful and enforceable.
State and territory security of payment laws provide that ‘pay when paid’ provisions in a contract have no effect. This means that contractors must not withhold a payment to a subcontractor while they await payment under another contract.
Some security of payment laws provide maximum time periods for payment terms. Contractual payment terms that exceed these limits are not enforceable. For details about the rules in your state or territory, please see further information and help, which includes a summary checklist of the timeframes and requirements in each jurisdiction.
If you have a right or obligation under security of payment laws, a contract term that seeks to exclude that right or obligation is not enforceable.
What should I do about my contract?
You should refer to the relevant security of payment law and assess how timeframes can impact your business. Be aware that you can negotiate terms that comply with these laws, or point out the maximum time period to your client.
Please seek your own legal advice regarding your contract.
For details and advice about the rules in your state or territory, please see further information and help.
The Code prohibits contractors from engaging in illegal or fraudulent phoenix activities for the purpose of avoiding any payment due to another building contractor or building industry participant or other creditor.
If you are concerned about phoenix activities, please report this to the ABCC by completing and submitting the security of payment reporting form.
The ABCC is also a member of the Phoenix taskforce, which comprises more than 20 Federal, State and Territory government agencies, including the ATO, Australian Securities & Investments Commission (ASIC), Department of Employment, and the Fair Work Ombudsman.
For further information, please refer to the Phoenix taskforce website.
Security of Payments Working Group
The Security of Payments Working Group was established under the BCIIP Act and enhances protections for subcontractors by improving compliance with security of payment legislation.
A key function of the group is to monitor the impact that the ABCC has on improving compliance with security of payment obligations.
For more help with security of payment rights and responsibilities, please contact the ABCC on 1800 003 338 or via email to firstname.lastname@example.org.
To report delayed or disputed progress payments, or any possible Code breaches relating to security of payment—such as coercion not to dispute a payment—please complete this security of payment reporting form.
- Security of payment reporting form
- Security of payment state and territory laws checklist (Word - 91KB)
- Flyer: Pay your subcontractors on time. Their livelihood depends on it (PDF - 285KB)
- Flyer: Are you owed money? Subcontractors deserve to be paid on time (PDF - 292KB)
- Booklet: Security of payment quick guide for subcontractors (PDF - 340KB)
- Fact sheet: Security of payment questions and answers
- Code for the Tendering and Performance of Building Work 2016
- Construction contractors security of payment presentation – Yamba NSW, October 2018 (PDF - 2 MB)
Help is also available from state and territory agencies
Security of payment-related state and territory agencies are listed below and can provide information on relevant laws, details of adjudicators for payment delays and disputes, and the process and timeframes for accessing adjudication.
1300 815 127
1800 072 722
1300 489 099
1300 654 499
08 8924 7608