Security of Payment Act VIC: builder's guide to the VIC SoP Act

TL;DR

Victoria’s Building and Construction Industry Security of Payment Act 2002 gives builders, subcontractors, and suppliers a fast-track right to recover unpaid progress payments without going to court. As of 15 April 2026, the Act was significantly reformed: the unique “excluded amounts” restriction is gone (you can now claim variations, delay costs, and latent condition costs through the Act), and the old “reference date” concept is abolished (one payment claim per calendar month is now the rule). Respondents have 10 business days to issue a payment schedule; any contract clause extending payment beyond 20 business days is void. The biggest risk for builders is missing the 10-business-day adjudication application window after receiving a payment schedule. Residential owner-occupier contracts (domestic building contracts under the Domestic Building Contracts Act 1995) remain excluded unless the owner is “in the business of building residences.”

In plain English

The Building and Construction Industry Security of Payment Act 2002 (VIC) (“the Act” or “VIC SoP Act”) gives builders, subcontractors, and suppliers the right to pursue unpaid progress payments through a statutory adjudication process that sits outside the courts. Serve a valid payment claim, wait for a payment schedule in response, and if payment is withheld or underscheduled, apply for adjudication through an Authorised Nominating Authority (ANA). An adjudicator’s determination is enforceable as a court judgment.

The Act applies to most construction contracts in Victoria, verbal or written, commercial or residential. The major exception is direct contracts between a builder and a homeowner under a domestic building contract (see “Residential exclusion” below). The most significant reforms to the Act in two decades took effect on 15 April 2026 under the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (VIC) (verified 2026-05-09, MinterEllison, Changes to Victoria’s SoP regime).

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 Victoria. This includes (verified 2026-05-09, Holding Redlich, Victoria Security of Payment):

Head contractors claiming from principals (owners, developers)
Subcontractors claiming from head contractors
Suppliers of related goods and services in connection with construction work

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

Residential exclusion (domestic building contracts)

The Act does not apply to a domestic building contract within the meaning of the Domestic Building Contracts Act 1995 (VIC) between a builder and a building owner for the carrying out of domestic building work. The exception is when the building owner is “in the business of building residences” and the contract is entered into in the course of, or in connection with, that business (verified 2026-05-09, Turtons Lawyers, Security of Payment Act VIC).

In practice: if a homeowner contracts directly with a builder to construct or renovate their own home, the builder cannot use the Act against that client. However, any subcontractor or supplier engaged by the builder is fully covered by the Act, even on a domestic project. The domestic building exclusion only cuts the head-contract relationship (builder to homeowner), not the subcontract layer beneath.

Whether the VIC Act should be extended to all residential building work (as NSW did from 1 March 2021) remains under consultation as of May 2026.

Payment claims (post 15 April 2026)

Since 15 April 2026, the requirement for a “reference date” to arise before making a payment claim has been abolished. The new rule: a claimant may serve one payment claim per calendar month, on or after the last day of any named month in which work has been performed. An additional claim may be served on contract termination (verified 2026-05-09, Ashurst, Significant amendments to Victoria’s Security of Payment Act).

A valid payment claim must:

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
Statutory endorsement	State that the document is a claim made under the Building and Construction Industry Security of Payment Act 2002
Served within time	Claims must be served within 6 months after practical completion of all construction work under the contract (extended from 3 months pre-April 2026)

Excluded amounts: abolished from 15 April 2026. Before the reform, Victoria uniquely prevented contractors from claiming variations, latent condition costs, delay damages, and other non-straightforward contractual entitlements in payment claims. Those restrictions are gone. From 15 April 2026, any amounts a claimant is contractually or legally entitled to may be included in a payment claim (verified 2026-05-09, MinterEllison, Changes to Victoria’s SoP regime).

Payment schedules

A respondent who receives a payment claim must respond within 10 business days of receiving the claim (or a shorter period if the contract specifies). The response must be a written payment schedule that (verified 2026-05-09, Holding Redlich, Victoria Security of Payment):

Identifies the payment claim it relates to
States the scheduled amount the respondent proposes to pay (which may be nil)
Includes the 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 withholding reasons in adjudication that were not included in the schedule. This lockout rule was one of the April 2026 reforms aligning VIC with NSW, QLD, and WA (verified 2026-05-09, Ashurst, Significant amendments to Victoria’s Security of Payment Act).

Payment due dates (post 15 April 2026):

Scenario	Default due date
Payment claim served, schedule served or not served	Within 20 business days of receipt of the payment claim
Contract clause specifying payment	Maximum 20 business days; any clause extending beyond this is void

Contracts may specify shorter payment terms. They cannot extend beyond 20 business days (verified 2026-05-09, MinterEllison, Changes to Victoria’s SoP regime).

Summer shutdown: The period 22 December to 10 January is excluded from business day calculations for enforcement and adjudication timelines.

Adjudication application

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, Adjudicate Today, Victoria Security of Payment).

Application windows:

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	Claimant must first serve a s18(2) notice of intention to apply; respondent has 2 business days to serve a schedule; claimant then has 5 business days after that period expires to lodge the application

Missing either window extinguishes the right to adjudicate for that payment claim period. A new claim can be served in a subsequent calendar month.

The adjudication application must be in writing and lodged with the ANA. It must include the payment claim, the payment schedule (if one was served), the claimant’s submissions, and any contract documents (verified 2026-05-09, Turtons Lawyers, How to make an adjudication application in Victoria).

Adjudication response

Once the ANA appoints an adjudicator and notifies the respondent, the respondent has the later of 5 business days after receiving the adjudication application or 2 business days after receiving notice of the adjudicator’s appointment to lodge an adjudication response (verified 2026-05-09, Holding Redlich, Victoria Security of Payment).

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

Adjudicator’s determination

The adjudicator must make their determination within 10 business days of the date the adjudication response was (or was required to be) lodged. The parties may agree to extend this period (verified 2026-05-09, Adjudicate Today, Victoria Security of Payment).

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.

An adjudication determination is not a final decision on the parties’ legal rights. Either party can take the underlying dispute to court or arbitration after the adjudication, but the paying party must pay the adjudicated amount first.

Time bar fairness test (new April 2026)

Section 13A, introduced from 15 April 2026, empowers courts, adjudicators, arbitrators, and expert determiners to declare a notice-based time bar provision in a construction contract “unfair” and unenforceable. A time bar is unfair if compliance was unreasonably impossible or unduly onerous having regard to the parties’ bargaining power and technical competence. This is a significant departure from the strict time bar regime that previously applied (verified 2026-05-09, Ashurst, Significant amendments to Victoria’s Security of Payment Act).

Performance security (new April 2026)

Eight new provisions govern performance security under the Act. Key rules:

A respondent holding performance security (bank guarantee, retention money) must release it within 10 business days after the defects liability period ends.
A party intending to have recourse to performance security must give at least 5 business days’ written notice before accessing it.
The 5-business-day notice requirement cannot be contracted out.

(verified 2026-05-09, Ashurst, Significant amendments to Victoria’s Security of Payment Act)

Retrospective application

The April 2026 amendments apply to all construction contracts irrespective of when they were entered into. However, payment claims already served and adjudication applications already pending as at 15 April 2026 are dealt with under the pre-amendment Act (verified 2026-05-09, MinterEllison, Changes to Victoria’s SoP regime).

What it doesn’t cover

Domestic building contracts (homeowner-builder): Direct contracts between a builder and a homeowner under the Domestic Building Contracts Act 1995 are excluded from the Act, unless the homeowner is in the business of building residences.
Employees: Employment relationships are outside the Act. It covers contractors and subcontractors, not workers engaged under an employment contract.
Contracts governed by another state’s law: The Act applies only to construction contracts where work is performed in Victoria.
Mixed-use developments: Where a contract covers both domestic and non-domestic building work, whether the exclusion applies depends on the dominant character of the work. This is fact-specific and has been the subject of case law (verified 2026-05-09, MinterEllison, When a builder is “in the business of building residences”).

Practical implications

For builders and subcontractors

The April 2026 reforms are the most builder-friendly changes to the VIC SoP Act in twenty years. The removal of the excluded amounts regime means variations, delay costs, and latent condition claims can now be pursued through adjudication rather than being held over for court. The abolition of reference dates simplifies the process: serve one claim per calendar month.

Key disciplines to lock in:

Serve payment claims in writing with the statutory endorsement. Claims without the endorsement are defective.
Calendar the 10-business-day adjudication application window after receiving a payment schedule. This window is strict and missing it means waiting until the next calendar month to serve a fresh claim.
On contracts entered pre-April 2026, check whether excluded amounts that were previously unclaimable can now be included in a fresh payment claim from 15 April 2026 onward.
Note the summer shutdown: 22 December to 10 January does not count as business days for adjudication and enforcement timing.

For principals and clients (non-homeowner)

A payment schedule that fails to include all withholding reasons is now a hard barrier in adjudication. Any reason not in the schedule cannot be raised later. Commercial clients and head contractors should ensure that every payment schedule is carefully drafted to capture all genuine grounds for withholding.

Ignoring a payment claim entirely is the most costly mistake: the full claimed amount becomes due and payable, and the claimant can proceed directly to adjudication. A nil-value payment schedule served in time is far better than no schedule at all.

For homeowners (owner-occupier)

If you have contracted directly with a licensed builder to construct or renovate your own home, the builder cannot use the VIC SoP Act against you. Payment disputes on domestic building contracts are handled through Consumer Affairs Victoria and the Domestic Building Dispute Resolution Victoria (DBDRV) process under the Domestic Building Contracts Act 1995. Note, however, that the builder’s subcontractors and suppliers remain covered by the SoP Act in their own contracts with the builder.

Authorised Nominating Authorities (ANAs)

ANAs are authorised under the Act to receive adjudication applications, appoint adjudicators, and administer the adjudication process. The Victorian Building Authority (VBA) maintains an ANA register. Each ANA publishes its own application form and fee schedule on its website. Common ANAs used in Victoria include Adjudicate Today, RICS Dispute Resolution Service, and others listed on the VBA register (verified 2026-05-09, VBA, Authorised nominating authorities).

Source link

Building and Construction Industry Security of Payment Act 2002 (VIC) on legislation.vic.gov.au.

VBA, Security of Payment (verified 2026-05-09).

References

Building and Construction Industry Security of Payment Act 2002 (VIC) (verified 2026-05-09)
Domestic Building Contracts Act 1995 (VIC) (verified 2026-05-09)
VBA, Security of Payment (verified 2026-05-09)
VBA, Authorised nominating authorities (verified 2026-05-09)
MinterEllison, Changes to Victoria’s Security of Payment regime have now commenced (verified 2026-05-09)
Ashurst, Significant amendments to Victoria’s Security of Payment Act are now in effect (verified 2026-05-09)
Holding Redlich, Victoria Security of Payment Legal Guide (verified 2026-05-09)
Turtons Lawyers, Security of Payment Act VIC: everything you need to know (verified 2026-05-09)
Turtons Lawyers, How to make an adjudication application in Victoria (verified 2026-05-09)
Adjudicate Today, Victoria Security of Payment and Adjudication 2026 (verified 2026-05-09)
MinterEllison, When a builder is “in the business of building residences” (verified 2026-05-09)