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. While they have similar frameworks, most of the State and Territory schemes 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 the 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 accounts where required, reporting requirements and dispute settlement processes.
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.
Reports of delayed or disputed progress payments to the ABCC can be made using the Delayed or Disputed Progress Payment Reporting Form (Word - 160 KB | PDF - 140 KB) and submitting to enquiry [at] abcc.gov.au.
What is a disputed payment?
For the purposes of sections 11D and 11E of the Building Code 2016, a progress payment is ‘disputed’ when it is referred to adjudication. Code covered entities are required to report to the ABCC whenever they have been served with or have made an adjudication application, setting out the amount claimed by the claimant, the amount scheduled by the respondent, the name of the adjudicator, the adjudication reference number and the date when an adjudication determination/decision is expected to be given.
Code covered entities will further be requested to report to the ABCC notification of an adjudication determination/decision and if the determination/decision required the payment of an adjudicated amount. The ABCC will request confirmation on whether the adjudicated amount has been paid and if not, the reasons why.
What is a delayed payment?
A progress payment is ‘delayed’ when the amount payable in accordance with a determination of an adjudicator is not paid by the date that the payment fell due, as dictated by the determination. Any report of a ‘delayed’ payment will require reasons for why the payment hasn’t been made in accordance with the determination.
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.
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.
The ABCC is a member of the Phoenix taskforce that comprises over 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, refer to the Phoenix taskforce website .
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.
MAKING A COMPLAINT OR NEED MORE INFORMATION?
If you wish to make a complaint to the ABCC regarding security of payments or for further information, advice or assistance please contact the ABCC at 1800 003 338 or enquiry [at] abcc.gov.au.