Victoria's Security of Payment Laws Overhauled: What You Need to Know

Introduction

As of 15 April 2026, significant amendments to Victoria’s Building and Construction Industry Security of Payment Act 2002 have come into effect, reshaping how payment claims are made, defended, and managed across the construction industry. These changes, which were introduced by the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025, apply to all contracts, including those entered into before the commencement date.

Broader Scope for Adjudication Claims

One of the most impactful changes is the abolition of “excluded amounts” and “claimable variations.” Previously, these provisions restricted the types of claims that could proceed to adjudication. Now, contractors can pursue a much wider range of claims, including delay costs, latent conditions, changes in regulatory requirements, and breaches of contract. This is a significant win for contractors who have long been limited in the claims they could bring under the Act.

At the same time, provided their contract includes a valid set-off clause, respondents can now deduct certified liquidated damages from payment claims, bringing Victoria more in line with other Australian jurisdictions.

Payment Claims and Timing

The concept of “reference dates”, which has long been criticised as confusing and open to abuse, has been replaced with a straightforward monthly entitlement. Contractors now have a statutory right to serve one payment claim per month from the last day of the month in which work was first performed. A final payment claim can be served up to six months after practical completion or termination of the contract.

Maximum payment terms are now capped at 20 business days from the date the payment claim is served. Pay-when-paid provisions are also prohibited. If a contract ties payment to an upstream contract or specifies a period longer than 20 business days, the period automatically reverts to 10 business days.

New Rights Around Security

A new statutory right allows contractors to claim the release of performance security. This includes retention money, performance bonds, and bank guarantees. Once practical completion is reached or the defects liability period has expired. Security must be released within 20 business days of those trigger events.

Additionally, any party wishing to make recourse against security under a construction contract must first provide five business days’ written notice, regardless of whether adjudication is underway.

Critical Change for Respondents

Perhaps the most immediately practical change is the prohibition on raising new reasons in an adjudication response that were not identified in the payment schedule. Payment schedules now set the absolute outer boundary of any adjudication defence. Any reason not raised at that stage is treated as waived, making thorough and detailed payment schedules more critical than ever.

With these reforms now live, all parties to construction contracts in Victoria should urgently review their contract administration procedures, payment schedule templates, and claims strategies to ensure compliance.

To learn more about any of the matters discussed here, or if you require legal assistance, please contact Chris Moshidis, Director and Principal Lawyer on +61 3 9521 7956 or chris@urbanlawyers.com.au.