The amended SOP Act applies to construction contracts irrespective of the date the contract was entered into – i.e. from 15 April 2026 the amended SOP Act applies to all payment claims made under the SOP Act and the broader provisions (including regarding time bars) apply retrospectively and prospectively to all construction contracts in Victoria
Summary of the changes to Victoria's Security of Payment regime
- repealing the "excluded amounts" regime;
- repealing the concept of "reference dates";
- extending the time for submission of payment claims;
- precluding the inclusion of "new reasons" in a payment schedule;
- the power to declare time bar provisions "unfair";
- introducing a maximum time period for a respondent to make payment;
- 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.
Detailed changes to Victoria's Security of Payment
1. Excluded amounts and claimable variations
The Victorian SOP Act was 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 resulted 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 caused interim payment entitlements under the SOP Act to differ from contractual progress payment entitlements. This forced 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 has substantially broadened 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.
If a date by which a claimant can submit a payment claim under a contract is longer than any of the dates in the SOP Act, the dates in the SOP Act 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 previous position which is that a payment claim served early is invalid for the purposes of the SOP Act.
3. Time for submission of payment claims
A default 'last day of the month' time for submission of payment claims has been included.
Previously, a claimant’s time for submitting payment claims expired three months after the relevant reference date. The SOP Act 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.
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.
4. New reasons
A unique feature of the Victorian SOP Act was that new reasons for withholding payment could be raised by a respondent in an adjudication response, without those reasons first having been included in a payment schedule. The SOP Act then provided 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.
5. 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 is "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.
6. Time for payment
The Bill introduces a maximum time period for a respondent to make payment, being 20 business days after receipt of the payment claim.
Importantly this obligation is not tied to receipt of a tax invoice or any other action by a claimant.
7. 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 SOP Act requires release within 10 business days after the earliest claim date under section 17B(1) - which is 20 business days after the final defects 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 SOP Act does not provide a statutory right to claim release of performance security at practical completion unless expressly stated in the contract.
8. 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.
When will the changes to the SOP Act commence?
The amendments to the SOP Act commenced on 15 April 2026.
Part 2 of the Bill applies 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 15 April 2026.
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 received Royal Assent.
For further information or advice on these legislative changes, please contact our team.
