Major reforms ahead for Victoria's Security of Payment legislation

Last month, the Victorian Government introduced the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 (Bill) into Parliament.  

The Bill proposes to implement the recommendations of a parliamentary inquiry into payment practices in the Victorian construction industry and, if passed, will significantly reshape the operation of the Building and Construction Industry Security of Payment Act 2002 (Vic) (SoP Act).

If enacted, the Bill will bring Victoria in line with many of the security of payment regimes operating across the rest of Australia.  

The reforms are scheduled to take effect no later than 1 September 2026.  Importantly, the amendments will apply retrospectively, meaning they will extend to pre-existing construction contracts on foot at the time the relevant amendments commence.  

One exception is that the proposed amendments to Part 3 of the SoP Act (i.e. procedure for recovering progress payments) will not apply where a payment claim has already been served under the current SoP Act, or an adjudication application has commenced but not yet determined before the commencement date of the amendments.

Key changes to the SoP Act include:

• removal of "excluded amounts" and "reference dates", meaning that claimants will be able to include disputed variations, latent conditions and time-related costs in their claims, which may be made on and from the last day of each month (or earlier if the contract permits);  
• introduction of a Christmas shut-down period, meaning that the definition of a 'business day' will exclude the period from 22 December to 10 January, suspending enforcement and adjudication timeframes under the SoP Act;
• unfair notice-based time bar, meaning that a statutory fairness test will apply to notice-based time bars.  Adjudicators and courts may declare such provisions unfair and unenforceable where compliance is not reasonably possible or would be unreasonably onerous;
• shorter timing for progress payment, meaning that respondents will be required to pay, or release security to, the claimant within 20 business days after service of a payment or performance security claim;  
• new performance security regime, meaning that a statutory right to seek the return of performance security (including bonds, guarantees and retention money) will be introduced.  A party seeking to call on performance security will be required to give at least 5 business days' notice of its intention; and
• no new reasons for withholding payment, meaning that respondents will be precluded from raising new reasons for withholding payment during an adjudication.  They will be limited to those reasons already included in the relevant payment schedule.

With commencement anticipated in September 2026, all parties should begin reviewing their contract administration processes, risk allocation strategies and dispute management procedures now to ensure compliance and minimise disruption once the changes come into force.

Please contact our Construction and Infrastructure team if you require assistance.

This article was written by construction and infrastructure specialist lawyers Phillip Coady, David Wright and Daniel Oh.

‍