15 April 2026
6 min read
#Construction, Infrastructure & Projects
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From 15 April 2026, far-reaching changes to construction contracts and payment claim processes in the Victorian building and construction industry will take effect. These will have a significant, immediate and retroactive impact on the rights and obligations of parties to construction contracts in Victoria.
In very simple terms, Victoria’s security of payment regime is now much broader, allowing a greater scope of claims and defences to be brought through the security of payment claim process. A range of new provisions significantly affect the commercial risk allocation on Victorian construction projects, regardless of what may have been agreed in the contract.
We summarise in this article the key changes to the law, with a view to alerting construction participants to the new risks and opportunities faced on their projects.
On 14 April 2026, the Victorian Government proclaimed that the amendments to the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) in the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2005 (Vic) would commence on 15 April 2026.
That means that the far-reaching reforms to the Victorian security of payment regime are now in effect. The reforms have, from 15 April 2026, changed the rights and obligations of parties to existing and future construction contracts. Payment claims already made or adjudication applications that are underway are generally not substantively affected, subject to some exceptions in relation to processes and the service of documents. Two relatively minor provisions have not yet commenced, and it appears they may be the subject of further amendment.
It is understood that that government advised industry stakeholders around 8 April 2026 that the reforms would commence on 15 April 2026. Nevertheless, it is expected that many in the industry will be caught unaware that the changes have now come into effect. While it was known that the changes would come into effect no later than 1 September 2026, there had been limited understanding in the industry before now as to whether the changes would commence earlier, and if so, when. That has now occurred.
We have previously summarised the changes to the security of payment regime in some more detail, and also written in detail on specific new powers in relation to time bars.
In this article we briefly summarise the new key rights and obligations of which industry participants should immediately be aware and be incorporating into their processes on current and future projects.
The concepts of ‘excluded amounts’ and ‘reference dates’ in the SOP Act have now been abolished.
A progress payment under the SOP Act can now generally be claimed for any construction work under the contract and associated costs. Respondents can also generally assert a wider range of reasons to deny or offset payment claims.
Further, a payment claim can now generally be made on and from the last day of every month, rather than from ‘reference dates’ prescribed in the contract for payment claims.
The result for most existing projects is that claimants are entitled to make payment claims for construction work from April 2026, which could be significantly wider in scope than previous payment claims.
For any new adjudications applications, a respondent will not be able to rely on any reasons that have not been included in a payment schedule. Respondents will now need to be more vigilant and proactive to ensure that all possible reasons are included within the 10 business days available to provide a payment schedule.
The maximum payment terms for a progress payment are now 20 business days following the service of a payment claim, even if the contract provides for a longer period. This could significantly affect cash flow assumptions on existing projects and the practice of staggering payment timeframes down the contractual chain.
Holders of performance security, principally cash retention and bank guarantees, will now need to provide a minimum of five business days’ notice before calling on security, even if the contract allows otherwise. This will give contractors an opportunity to negotiate or take steps to prevent the call on security.
Further, there is a new right for contractors to claim back performance security in a window following the end of the defects liability period. The provisions that define that window have some complexity but are at least for the whole of the month after defect rectification work is complete. If denied, the claimant can apply to an adjudicator to order the release of the security. This provides a new avenue for dealing with issues at the end of a project and shifts the commercial bargaining position of the parties.
Notice-based time bars can now be declared by decision-makers (including expert determiners, adjudicators, arbitrators and judges) to be unfair and of no effect.
Our earlier article goes into further detail about the scope and effect of this new power.
The most immediate effect for industry participants is that relying on a time bar to deny a claim will now be less certain, particularly if it appears harsh and unreasonable. Time bars may still be effective, but claimants may have a better bargaining position given their broader avenues for overcoming the time bar.
Claimants now have at least six months from practical completion or the supply of all goods and services to make a payment claim. This is increased from the three months that applied before the changes. The result is that claims that might have expired before 15 April 2026 could become available again, and claimants generally have significantly longer before their rights to make payment claims expire.
Other changes to the Act are of less immediate significance, but include:
While many understood that these changes were coming no later than 1 September 2026, there might be surprise that they have now come into effect so quickly.
Industry participants should quickly assess the risks and opportunities available on their current projects having regard to the new position under the law. At a minimum, participants should update their commercial processes to consider that:
Standard contracts and contracts under negotiation should also be updated to consider the new statutory provisions, which affect risk allocations under the contract.
If you have questions regarding your construction contract or the changes to the Victorian security of payment regime, please contact us here, read our more detailed articles here and here, or watch our on-demand video here which covers the above in more detail.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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