Significant amendments to Victoria’s Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) commenced on 15 April 2026 under the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 and will apply retrospectively to construction contracts already on foot.
The amendments introduce significant reforms which represent a major shift in how payment claims, adjudications and performance security are handled on Victorian construction projects. Cashflow is the lifeblood of the construction industry, and these amendments are aimed at broadening access to payment, particularly for contractors.
Importantly, the changes will apply to contracts entered before the amending legislation became effective in addition to new agreements. However, the changes will not apply to payment or adjudication claims made before 15 April 2026.
Key Changes
Removal of the “excluded amounts” regime
The most significant reform is the abolition of Victoria’s unique ‘excluded amounts’ and ‘claimable variations’ regimes.
Under the previous Act, claimants were prevented from including a range of contractual entitlements in payment claims and adjudications.
These restrictions have now been removed. Claimants may include previously excluded amounts such as extension of time claims, delay damages, and disputed variations in payment claims and adjudication applications, while respondents may deduct certified liquidated damages where contractually entitled.
This reform brings Victoria into alignment with other Australian jurisdictions and is expected to lead to an increase in the number and scope of payment claims and adjudications.
Reference dates abolished
The date when a claimant is entitled to a progress payment will be abolished.
Under the amended Act, claimants may now serve one payment claim per calendar month where work is carried out or goods or services are supplied. Claimants may now also serve a claim following termination, purported termination, or expiry of a contract.
Contract clauses requiring payment claims to be submitted less frequently than monthly are ineffective to that extent. Early payment claims are no longer invalid and will instead be taken to have been served on the earliest permissible date. Therefore, previous payment claims being invalid on technicalities such as early service no longer apply.
Extended time to make payment claims
Payment claims can now also be served anytime up to 6 months after practical completion, unless the contract provides for a later date. This extends from the previous 3-month period provided prior to changes. This provides greater flexibility for final claims at the end of a project.
Notice-based time bars subject to fairness test
Notice-based time bars are clauses which make claims contingent on providing notice of that claim within a specified time, or it is invalid. The amended Act introduces a new statutory power allowing adjudicators and courts to declare notice-based time bar provisions unfair and unenforceable where compliance is not reasonably possible or unreasonably onerous on a party.
This reform is likely to affect common contractual notice regimes relating to variations, extensions of time and latent conditions. A declaration of unfairness applies only to the particular entitlement in question and does not permanently invalidate the clause.
Christmas shutdown period
The definition of “business day” now excludes the period from 22 December to 10 January each year. This reflects industry practice and aligns Victoria with other jurisdictions, reducing the risk of enforcement action being strategically commenced during the Christmas period.
Performance Security Claims
The amendments introduce a dedicated statutory framework governing performance security, including bank guarantees, performance bonds and cash retentions.
Key features include:
- a statutory right to claim release of performance security through the SOP regime;
- a deemed defects liability period where contracts are silent; and
- the ability to seek adjudication or court orders compelling release of security.
Contractual provisions delaying release beyond statutory timeframes are overridden by the Act.
Additionally, a party seeking recourse to security is now required to provide at least five business days’ notice before calling on security. The notice must state the contractual basis for recourse and the circumstances justifying the amount. This requirement applies to all construction contracts and cannot be varied.
Practical implications
The changes will likely have immediate and practical consequences for the Victorian construction industry, including:
- increased scope and frequency of payment claims and more contentious adjudications;
- heightened importance of disciplined contract administration; and
- material changes to how performance security must be managed.
In light of these extensive and substantial changes, interested parties should review their existing contractual arrangements.