Security of payment clause: working with the state payment laws

Sample clause

a steel fabrication subcontract between Ironbark Structures, a fictional head contractor, and Hunter Valley Steel Fabrication, a fictional subcontractor, on a warehouse project in Maitland, New South Wales

22. Security of Payment 22.1 In this clause, the Act means the Building and Construction Industry Security of Payment Act 1999 (NSW). 22.2 Hunter Valley Steel may make a payment claim under the Act on the last day of each month, which is also the Claim Date under this Subcontract. 22.3 Payment claims and payment schedules must be served by email to the Payment Address of the receiving party stated in Item 9 of the Schedule, and a change of Payment Address takes effect 5 Business Days after written notice of it. 22.4 Ironbark Structures must give any payment schedule within 10 Business Days after a payment claim is served. 22.5 Ironbark Structures must pay a progress payment within 20 Business Days after the payment claim is made. 22.6 Nothing in this Subcontract excludes, modifies or restricts the operation of the Act, and any provision that would do so has no effect to that extent. 22.7 A payment made under an adjudication determination is on account of amounts payable under this Subcontract.

Sample wording, not legal advice.

Variants

What to negotiate

• Service addresses

  Most adjudication fights about deadlines are really fights about service. Both sides benefit from naming one email address for payment claims and schedules, a person who monitors it, and a rule for changing it. Claimants want email service accepted, and respondents want the address specific enough that a claim sent to a site supervisor's inbox does not start the clock.

• Pay when paid wording

  Head contractors sometimes want payment to depend on being paid by the principal. Security of payment legislation makes that kind of provision ineffective, so negotiating it only creates false comfort. The legitimate points to negotiate are the payment period within the statutory maximum, the evidence a claim should attach, and how disputed amounts are shown in the schedule.

• Claim dates

  The statute sets a default, but a contract can set an earlier claim date in some states. Subcontractors ask for claim dates aligned to the head contractor's own cycle, so they are paid from the same funds. Head contractors want claims early enough in the month to assess them before their own claim to the principal falls due.

• Time bars and final claims

  Contracts often bar claims not made within a set time after completion. Those bars cannot cut down the statutory right to claim within the period the Act allows, but they can still affect contractual entitlements. Subcontractors check that any contractual time bar is at least as long as the statutory window, so the two do not give different answers for the same work.

The risk of leaving it out

The legislation applies whether or not the contract mentions it, so leaving the clause out does not remove anyone's rights. What goes missing is the practical detail: where claims are served, what the claim date is, and which state's timeframes the site team should follow, which is exactly the detail that decides whether a payment schedule arrives in time.

The Acts by state

New South Wales applies the Building and Construction Industry Security of Payment Act 1999, with a payment schedule due within 10 business days and payment within 15 business days for a head contractor or 20 for a subcontractor. Victoria applies its 2002 Act of the same name, with a payment schedule within 10 business days and an excluded amounts regime that keeps some claims out of a statutory payment claim. Queensland applies the Building Industry Fairness (Security of Payment) Act 2017, with a payment schedule within 15 business days or an earlier contract date. Western Australia has a 2021 Act, South Australia, Tasmania and the ACT each have a 2009 Act, and the Northern Territory has the Construction Contracts (Security of Payments) Act 2004.

What the clause cannot do

Every Australian security of payment Act voids contract terms that exclude, modify or restrict its operation, and several also make pay when paid provisions ineffective. A contract therefore cannot lengthen the statutory time for a payment schedule, stop a claimant from applying for adjudication, or make payment depend on the head contractor being paid. What it can do is shorten times, fix claim dates where the Act allows, and set up the service details that let the statutory process run smoothly.

Where it sits in a generated document

In a generated subcontract the security of payment clause usually sits straight after the progress claims clause, with the Act named once as a defined term and the payment addresses set out in the schedule. Dates and business day counts are written in as content. The document does not cite or check the legislation, so the Act named and its timeframes should be confirmed for the state where the work is done.

Documents that carry this clause

Subcontractor agreement template that flows the head contract downA subcontract exists to pass the head contract's obligations down one level and move the money back up on time. This one names the scope by drawing, sets the progress claim dates against the security of payment rules, holds retention and states the insurances, so the trade knows exactly when it is paid and for what.Electrical contractor agreement with a licence clause and staged paymentsElectrical work is the one trade where the paperwork at the end matters as much as the work, because without the certificate the installation is not signed off. This agreement ties the last payment stage to that certificate and sets the progress claim deadlines the payment legislation actually uses.Roofing contract template with a materials table and a weather ruleA roof replacement is the one job where the house is open to the sky at the end of the day, so the clause that matters most is the one about closing it. This contract limits how much roof can be stripped at once, names every product with its warranty years, and says who pays when water gets in.

Questions people ask