Expansion of the Victorian Regime for Payment Security Reforms Unveiled
The Victorian government has announced significant reforms to its security of payment regime in the construction industry. The changes, outlined in the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025, aim to bring Victoria in line with other Australian states and expand the regime's scope.
The reforms take effect immediately upon the bill becoming law and apply to contracts entered into at any time. One of the key changes is the introduction of a notice-based time bar, which means that recourse to performance security, such as performance bonds or retention money, is now prohibited unless notice has been given and five business days have passed since the notice.
The reforms also broaden the 'pay when paid' provisions, making certain contingencies invalid. Reference dates have been abolished, and payment claims can now be served on and from the last day of each month work is carried out, or an earlier date specified in the contract. For payment claims related to work between 22 December and 31 December, they can now be served on and from 31 January in the following year.
Another significant change is the abolition of excluded amounts, unique to the Victorian regime, which will broaden what is claimable under the Act. Adjudicators can no longer consider reasons not set out in the payment schedule, and respondents can't raise new reasons for withholding payment in their adjudication response.
The reforms are based on the recommendations from a 2023 inquiry into employers and contractors who fail to pay subcontractors. A claimant can serve only one payment claim per month, and this entitlement is not affected by contract termination or expiry.
Time-related costs and certain disputed variations will now be recoverable under the security of payment regime. Adjudicators can now declare notice-based time bars as unfair if compliance is not reasonably possible or unreasonably onerous.
The period from 22 December to 10 January will be excluded from the definition of 'business day', providing relief during the holiday season. The debate on the bill has been adjourned for two weeks, and it is not currently known when the bill will come into force, but it will be by at least 1 September 2026, with some suggestion that it is likely to be adopted by early 2026.
The reforms also introduce measures to help claimants claim for the release of performance security. However, the search results do not provide information about the person who submitted the bill to reform the security performance regulation for the construction sector in Victoria.
The changes are expected to bring fairness and transparency to the construction industry, ensuring that subcontractors are paid promptly for their work. The Victorian government has emphasised its commitment to supporting the construction sector and ensuring that all parties involved in a construction project are treated fairly.
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