Changes to Victoria's Security of Payment Act have passed Parliament

8 minute read 03.11.2025 Chris Hey, Jeanette Barbaro and Nikki Miller

The Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 (Bill) has passed Parliament in Victoria. It awaits Royal Assent, with SOP Act changes effective from 1 Sept 2026 unless proclaimed earlier.

Key takeouts

The Bill delivers the most significant reforms to Victoria's SOP Act since 2006.

The headline reform is the abandonment of Victoria's unique "excluded amounts" regime. Other key changes include the power to declare notice-based time bar provisions "unfair" and new rules for performance security.

Further changes aim to better align Victoria's SOP Act with other jurisdictions, notably New South Wales and Western Australia.

Background to the Bill

In 2023, the Victorian government announced a parliamentary inquiry into the protection afforded to subcontractors for non-payment including under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act). The inquiry was conducted by the Environment and Planning Standing Committee. Following the inquiry, the Report of the Environment and Planning Committee of the Victorian Legislative Assembly was issued on 28 November 2023 (Report) and made 28 recommendations, including major changes to the SOP Act.

In October 2024, the Victorian Government provided its response to the Report. The Victorian Government supported all 28 recommendations, 16 in full and 12 in principle or in part.

On 30 October 2025, the Bill passed both Houses of Parliament in Victoria. The Bill implements many of the recommendations from the Report, including by:

repealing the "excluded amounts" regime;
repealing the concept of "reference dates";
precluding the inclusion of "new reasons" in a payment schedule;
extending the time for submission of payment claims; and
introducing a maximum time period for a respondent to make payment.

In addition, the Bill goes beyond the recommendations in the Report by:

entitling a party to make a claim for release of the whole or part of a performance security, and apply to a court or make an adjudication application in relation to the performance security claim; and
requiring a party to issue a notice of intention to have recourse to performance security at least 5 business days before having recourse.

Key changes to Victoria's Security of Payment Act

1. Excluded amounts and claimable variations

The Victorian SOP Act is well known for being unique in prohibiting the inclusion of certain categories of claims or entitlements, defined to be "excluded amounts", in payment claims or payment schedules. This results in certain contractual claims, such as:

most entitlements relating to variations;
latent conditions; and
time related costs (i.e. delay costs as well as liquidated damages), from being pursued and recovered under the SOP Act.

The "excluded amounts" regime often causes interim payment entitlements under the SOP Act to differ from contractual progress payment entitlements. This forces parties to pursue more costly final dispute resolution processes to determine their contractual rights.

The Bill repeals sections 10A and 10B of the SOP Act, therefore removing the concepts of "excluded amounts" and "claimable variations". This change will substantially broaden the type of claims that can be referred to adjudication in Victoria.

2. Reference dates

The issue of whether there is a valid "reference date", being a date on and from which a claimant has a right to make a progress payment, has been the subject of a large number of judicial review applications under the SOP legislation.

The Bill removes the "reference date" concept, and instead gives claimants the right to submit:

one payment claim per calendar month; and
a payment claim on or following termination of a contract.

Under the current SOP Act, a claimant’s time for submitting payment claims expires three months after the relevant reference date. The Bill now gives a claimant six months after practical completion to submit a payment claim, where the claim is for construction work or related goods and services.

If a date by which a claimant can submit a payment claim under a contract is longer than any of the dates provided by the Bill, the dates provided by the Bill will prevail.

The Bill also provides that a payment claim served before the relevant date for submission of a payment claim will still be valid – this reverses the current position which is that a payment claim served early is invalid for the purposes of the SOP Act.

3. New reasons

A unique feature of the Victorian SOP Act is that new reasons for withholding payment may be raised by a respondent in an adjudication response, without those reasons first having been included in a payment schedule. The SOP Act then provides a mechanism for the claimant to have an opportunity to respond to any new reasons raised during the adjudication process.

The Bill introduces a prohibition on respondents including new reasons in their adjudication response that were not previously included in the payment schedule, which aligns Victoria's adjudication regime with the other jurisdictions including New South Wales, Queensland and Western Australia.

4. Time bars

The Bill introduces a new section 13A to the SOP Act which provides that notice-based time bar provisions may be declared unfair if compliance with the provision is not "reasonably possible" or "unreasonably onerous".

A notice-based time bar provision may be declared unfair under the new section 13A to the SOP Act by an adjudicator, a Court, an arbitrator in arbitration proceedings under the terms of the contract, or an expert in expert determinations under the terms of the contract.

In considering whether a notice-based time bar provision is unfair, the following matters must be taken into consideration:

when the party required to give notice would reasonably have become aware of the last day on which notice could be given;
when and how notice is required to be given;
the relative bargaining power of each party in entering into the contract;
if compliance with the provision is alleged to be unreasonably onerous - whether the matters set out in the notice are final and binding;
that the parties to the contract have read and understood the terms of the contract;
that the party required to give notice has the commercial and technical competence of a reasonably competent contractor; and
any matter prescribed by the regulations for the purposes of this subsection.

5. Time for submission of payment claims

The definition of a "pay when paid provision" has been broadened to include any provision that otherwise makes payment contingent or dependent on the operation of another contract, including:

the liability to pay money owing;
the due date for payment of money owing;
a person's right to claim money owing; and
a person's right to claim the release of performance security.

6. Recovery of performance security

The Bill introduces new sections 17A to 17G to the SOP Act, which permit a person who claims to be entitled to the release of the whole or a part of a performance security to serve a claim on the person liable to release the performance security.

If a contract does not specify when performance security must be released, the Bill requires release within 10 business days after the earliest claim date under section 17B(1), which is 20 business days after the defect's liability period ends. In addition:

any contract term that delays payment of a progress claim or release of performance security beyond 20 business days is void; and
parties cannot contract out of sections 17A to 17C of the SOP Act, and interest may be payable if performance security is not released on time.

Notably, the Bill does not provide a statutory right to claim release of performance security at practical completion unless expressly stated in the contract.

7. Recourse to performance security

The Bill introduces a new section 17H to the SOP Act, which requires a party who intends to have recourse to the whole or part of a performance security under a construction contract to give a notice of intention to have recourse to the performance security at least 5 business days before doing so. The notice of intention to have recourse must identify the construction contract and the provisions on which the party relies to have recourse, state the amount of the performance security to which the party intends to have recourse and describe the circumstances that entitle the party to have recourse.

This change aligns the Victorian position with the recent changes in Western Australia.

Commencement

The amendments to the SOP Act commence on a date to be proclaimed, and if any remaining provisions of the Bill have not commenced before 1 September 2026, then they come into operation on that day.

By section 54(1) of the Bill, Part 2 of the Bill will apply to construction contracts irrespective of the date the contract was entered into. However, amendments to Part 3 of the SOP Act will not apply in respect of a payment claim served under section 14 of the SOP Act, or an adjudication application made under section 18 of the SOP Act, but not determined, before the commencement of the Bill.

Sections 54(3) to 54(10) of the Bill make provision as to when certain provisions of the Bill commence.

The Bill introduces a new section 55 to the SOP Act which provides for regulations of a transitional nature to be enacted. Regulations made under the new section 55 apply retrospectively on or from the day the Bill receives Royal Assent.

For further information or advice on these legislative changes, please contact our team.