Security of payments

Each State and Territory has its own Security of Payments legislation which provides legislative protections for contractors to receive payment for building work performed under a contract.  Whilst similar, the State and Territory schemes are different and may operate in slightly different ways. 

The ABCC has involvement in security of payments in two important respects:  through the national Security of Payments Working Group established by the Commonwealth Building and Construction Industry (Improving Productivity) Act 2016 and through the Code for Tendering and Performance of Building Work 2016 (Building Code). 

Where to seek help

The agencies that can provide assistance in relation to security of payment issues are outlined in our Industry Issues – Security of payments section.

Security of payments and the Building Code

The Building Code requires contractors (code covered entities) to:

  • comply with all applicable laws and other requirements relating to security of payment that are due to persons;
  • ensure that payments due are made in a timely manner and not unreasonably withheld; and
  • as far as practicable, ensure that disputes about payments are resolved in a reasonable, timely and cooperative way.

In addition to these requirements contractors proposing to submit an expression of interest or tender for Commonwealth funded building work should ensure they are familiar with all of the requirements of section 11D and 11E of the Building Code 2016 in relation to Security of Payments. For example, project bank account requirements.

Documented disputes settlement process

The Building Code 2016 requires contractors to have a documented dispute settlement process that details how disputes about payments to subcontractors will be resolved.  Contractors must comply with the dispute settlement process.

The disputes settlement process must include a referral process to an independent adjudicator for determination, if the dispute cannot be resolved between the parties. Contractors must comply with any determination.

Reporting to the ABC Commissioner

Sections 11D(1)(f) and 11E(d) of the Building Code 2016 require contractors to report any disputed or delayed progress payment to the ABC Commissioner and the relevant Funding Entity as soon as practicable after the date on which the payment falls due.

Phoenix activities

The Building Code 2016 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.

Exercising rights under state or territory laws relating to security of payments

The Building Code 2016 also prohibits contractors from:

  • applying or attempting to apply undue influence or undue pressure on a contractor, subcontractor or consultant; or
  • organising or taking action, or threatening to organise or take action with intent to coerce a contractor, subcontractor or consultant;
  • to exercise or not exercise, or propose to exercise or not exercise, rights arising under state or territory laws relating to the security of payments that are due to any persons, or to exercise or not exercise those rights in a particular way.

 

NEED MORE INFORMATION?

For further information, advice or assistance please contact the ABCC at 1800 003 338 or enquiry [at] abcc.gov.au.