Security of Payment Act NSW: how to use it

TL;DR

The NSW Security of Payment Act 1999 is the cash-flow enforcement tool for builders, subcontractors, and suppliers when a payment claim is disputed or ignored. It covers all construction contracts in NSW: verbal, written, residential, and commercial. Serve a valid payment claim with the statutory endorsement and a supporting statement (head contractors only), wait up to 10 business days for a payment schedule in response, and if the respondent does not pay or underschedules, apply for adjudication through an Authorised Nominating Authority (ANA). The adjudicator’s determination issues within 10 business days of appointment and is enforceable as a court judgment. The most costly mistake under the Act is missing the 10-business-day window to apply for adjudication after a payment schedule arrives.

In plain English

The Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act” or “NSW SoP Act”) gives builders, subcontractors, and suppliers a fast-track right to recover unpaid progress payments without going to court. When a client or head contractor refuses to pay, or pays less than the amount claimed, the Act provides a process: serve a valid payment claim, wait for a payment schedule in response, and if payment is still withheld, apply for adjudication. An adjudicator’s determination typically issues within 10 business days of the adjudicator’s appointment and is enforceable as a court judgment.

The Act applies to most construction contracts in NSW, verbal or written, residential or commercial. Since 1 March 2021, owner-occupier residential contracts (where the client lives or intends to live in the property) are covered. As of 20 August 2024, unlicensed residential building contractors and those without the required Home Building Compensation Fund insurance lose their right to claim under the Act (verified 2026-05-09, Piper Alderman, NSW SoP Act Amendments).

What it requires

Who is covered

The Act applies to any person carrying out construction work or supplying related goods and services under a construction contract in NSW (verified 2026-05-09, NSW Government, About Security of Payment). This includes:

Head contractors claiming from principals (owners, developers)
Subcontractors claiming from head contractors
Suppliers of related goods and services

Contracts may be verbal, written, or partly both. The Act applies regardless of contract form.

Exclusions and limits (August 2024 residential amendment)

From 20 August 2024, a person carrying out residential building work under the Home Building Act 1989 (NSW) (“HBA”) cannot make a payment claim under the Act if they:

Do not hold a valid contractor licence required under the HBA for that work; or
Were required to obtain Home Building Compensation Fund (HBCF) insurance but did not take it out and provide it to the other party before work commenced.

This amendment applies retrospectively to contracts entered before 20 August 2024. An adjudicator who makes a determination in favour of an unlicensed or uninsured residential contractor makes a jurisdictional error, which can be set aside by a court (verified 2026-05-09, Piper Alderman, NSW SoP Act Amendments).

Step 1: Payment claim (s13)

A claimant serves a written payment claim on the respondent on or after a reference date. The reference date is either the date set in the contract for making claims, or the last day of each named calendar month if the contract does not specify a date. Only one payment claim can be made per reference date (verified 2026-05-09, NSW Government, Making a payment claim).

For contracts entered after 21 October 2019, a valid payment claim must include:

Requirement	Detail
Written form	Must be in writing
Work description	Clearly identify or describe the construction work, goods, or services claimed
Amount	State the claimed amount (including GST)
Statutory endorsement	Include the statement: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999”
Respondent identification	Clearly identify the respondent’s name, ACN/ABN

Head contractors claiming from the principal must also attach a supporting statement declaring that all subcontractors have been paid everything due at the date of the claim. Failure to attach a valid supporting statement makes the claim defective. A false supporting statement carries a maximum penalty of 1,000 penalty units for a corporation or 200 penalty units (or three months imprisonment) for an individual (verified 2026-05-09, NSW Government, Authorised nominating authorities for Security of Payment).

Claims must be made within 12 months of the work, goods, or services being last performed or supplied. After termination, only one additional claim may be made.

Step 2: Payment schedule (s14)

The respondent must respond within 10 business days of receiving the payment claim (or the contractual payment schedule deadline, whichever is earlier) (verified 2026-05-09, NSW Government, Making a payment claim). The response is a payment schedule in writing that:

Identifies the payment claim it relates to
States the scheduled amount the respondent proposes to pay (which may be nil)
Includes reasons for any amount withheld

If a payment schedule is not served within the deadline, the full claimed amount becomes due and payable. Once a payment schedule is issued, the respondent cannot raise new reasons in adjudication that were not included in the schedule.

Payment due dates after a valid claim (verified 2026-05-09, NSW Government, About Security of Payment):

Claimant type	Default due date
Head contractor (from principal)	15 business days after the claim
Subcontractor on non-residential work	20 business days after the claim
Subcontractor on owner-occupier residential work	10 business days after the claim

Contracts may set shorter payment terms. They cannot set longer terms than the statutory defaults.

Step 3: Adjudication application (s17)

If the respondent serves a payment schedule for less than the claimed amount, or fails to pay by the due date, the claimant can apply for adjudication. The application must be made to an Authorised Nominating Authority (ANA) (verified 2026-05-09, NSW Government, Authorised nominating authorities for Security of Payment).

Application windows (s17):

Scenario	Application window
Respondent served a payment schedule below the claimed amount	Within 10 business days after receiving the payment schedule
Respondent served no payment schedule and did not pay by the due date	Within 20 business days after the due date (after first serving a s17(2) notice on the respondent)
After serving a s17(2) notice and the respondent fails to schedule within 5 business days	Within 10 business days after expiry of the 5-day period

The s17(2) notice requirement: before applying for adjudication where no payment schedule was served, the claimant must give the respondent written notice of their intention to apply, and allow 5 business days for the respondent to provide a schedule. Missing any of these windows extinguishes the right to adjudicate for that reference period.

Step 4: Adjudication response (s20)

Once the ANA appoints an adjudicator and notifies the respondent, the respondent has either 5 business days after receiving the adjudication application, or 2 business days after receiving notice of the adjudicator’s appointment, whichever is the longer, to lodge an adjudication response (verified 2026-05-09, Turtons Lawyers, NSW Security of Payment Act).

The respondent may only rely on reasons that were included in the original payment schedule. New reasons cannot be raised in the adjudication response.

Step 5: Adjudicator’s determination (s21)

The adjudicator must make their determination within 10 business days of the date the adjudication response was (or was required to be) lodged (verified 2026-05-09, Turtons Lawyers, NSW Security of Payment Act). If the parties agree in writing, this period may be extended.

The respondent must pay the adjudicated amount within 5 business days of the determination.

If the respondent does not pay, the claimant may obtain a certificate from the ANA and register it as a judgment debt in a court of competent jurisdiction for enforcement.

An adjudication determination is not a final decision on the parties’ legal rights. Either party can take the underlying dispute to court after the adjudication, but the paying party must pay the adjudicated amount first (“pay now, argue later”).

What it doesn’t cover

Employees: employment relationships are outside the Act. The Act covers contractors and subcontractors, not workers engaged under an employment contract.
Supply of materials without construction work: a supplier selling materials off-site without performing any construction work may not be covered. The Act requires “construction work” or “related goods and services” in connection with construction work.
Unlicensed residential builders: from 20 August 2024, unlicensed or uninsured residential building contractors cannot use the Act for payment claims on HBA-covered work.
Contracts governed by another state’s law: the Act applies only to construction contracts where the work is performed in NSW.

Practical implications

For builders and subcontractors

The Act is a cashflow weapon, not a final dispute resolution mechanism. Use it when a client or head contractor:

Refuses to pay without issuing a payment schedule
Issues a payment schedule for far less than the value of work actually done
Delays payment past the statutory due date

Get the paperwork right before serving a claim. The statutory endorsement, the supporting statement (head contractors), and the reference date are all technical requirements that adjudicators will scrutinise.

Set calendar reminders for the application windows. The 10-business-day window after receiving a payment schedule is strict. A missed window means the claim must wait until the next reference date.

For principals and clients

The Act creates real consequences for ignoring payment claims. If a client receives a payment claim and does not serve a payment schedule within 10 business days, the full claimed amount becomes due and payable regardless of any dispute about quality or completeness. The client’s only enforcement route then is to pay and sue for the overpayment in court.

Every dispute about a stage payment should result in a written payment schedule served in time, specifying exactly which amounts are withheld and why. Blanket withholding without a schedule is the most expensive mistake a client can make under the Act.

Building Commission NSW enforcement

Building Commission NSW administers compliance with the Act, including the power to issue penalty infringement notices for breaches (for example, a head contractor who omits a supporting statement or provides a false supporting statement). Breach reports can be made directly to Building Commission NSW (verified 2026-05-09, Building Commission NSW, Compliance and enforcement policy).

Source link

Building and Construction Industry Security of Payment Act 1999 (NSW) on NSW Legislation.

NSW Government, Security of Payment information hub (verified 2026-05-09).

References

Building and Construction Industry Security of Payment Act 1999 (NSW) (verified 2026-05-09)
Home Building Act 1989 (NSW) (verified 2026-05-09)
NSW Government, About Security of Payment for construction contractors (verified 2026-05-09)
NSW Government, Making a payment claim under Security of Payment laws (verified 2026-05-09)
NSW Government, Changes to Security of Payment laws (verified 2026-05-09)
NSW Government, Authorised nominating authorities for Security of Payment (verified 2026-05-09)
Building Commission NSW, Compliance and enforcement policy (verified 2026-05-09)
Piper Alderman, NSW Security of Payment Act Amendments: Loophole closed for unlicensed residential builders (verified 2026-05-09)
Turtons Lawyers, NSW Security of Payment Act: everything you need to know (verified 2026-05-09)
K&L Gates, Owner-Occupiers Beware: NSW Security of Payment Act Now Applies (verified 2026-05-09)