Security of Payment in Victoria: the 2026 amendments and their effect on remedial contracts

Contract templates that still refer to “excluded amounts” and “reference dates” describe a statute that no longer exists in that form. The Building and Construction Industry Security of Payment Act 2002 (Vic) was substantially amended by the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025, with the substantive changes commencing 15 April 2026.

The amendments are relevant to owners corporations, building managers and builders engaging remedial contractors, because payment machinery is the mechanism through which remedial projects most often become adversarial.

Provisions removed

Excluded amounts have been abolished. The former Victorian regime carved out categories of claim — time-related costs, delay costs, latent condition costs, and costs arising from changes in regulatory requirements — and barred them from adjudication. That carve-out was a distinctively Victorian feature of the legislation and a persistent source of dispute over jurisdiction. The concept no longer appears in the Act.

The change is material to remedial work because latent conditions are not an exceptional occurrence on such projects; they are a normal characteristic of work on existing structures, where the condition of a balcony substrate is not established until the tiles and screed are removed. With the excluded amounts regime removed, those costs can be determined through the statutory adjudication process rather than being directed into general contractual litigation.

Reference dates have been removed. A payment claim previously had to be tied to an accrued reference date, and disputes over whether a reference date had accrued were a recurring preliminary issue. The requirement has been removed, simplifying the question of when a claim may validly be served.

Timeframes now applying

Step	Rule
Earliest payment claim	A contract cannot push the earliest service day later than the last day of each named month in which work was carried out
Claim frequency	A contract cannot require milestone claims less frequently than monthly
Latest payment claim	Up to the latest of the contract’s date, six months after practical completion, or six months after supply of related goods and services
Payment schedule	Within the contract period or 10 business days after the claim, whichever expires earlier — failure to serve renders the respondent liable for the full claimed amount
Payment due (contract silent)	10 business days after the earliest day a claim may be served
Maximum payment period	A contract term has no effect to the extent it provides for payment — or release of performance security — later than 20 business days after the claim is served
Adjudication determination	10 business days, extendable by agreement by up to a further 20

One definitional point affects the calculation of every period in the table: “business day” excludes 22 December to 10 January inclusive, along with weekends and Victorian public holidays. A claim served in December therefore does not run its response clock through the industry shutdown, and a respondent who assumes it does will misjudge the date by which a payment schedule must be served.

Release of performance security

The retention provisions are the genuinely new machinery in the amendments, and the provisions most directly relevant to facade and remediation contracting.

The amendments insert a regime allowing a contractor to serve a claim for release of performance security — cash retention or a bank guarantee — using the Act’s own process rather than commencing proceedings to recover it.

The earliest such a claim can be served is the earlier of a day at least 20 business days after the end of the relevant defects liability period, or a day or event specified in the contract. The entitlement to serve is not affected by termination, purported termination or expiry of the contract.

Retention on remedial contracts is routinely held past the end of the defects liability period, in some cases without any articulated reason, and commonly because no individual on the principal’s side holds responsibility for initiating release. Contractors have historically absorbed the loss, because the cost of recovering a modest retention sum through the courts exceeds the sum in dispute. A statutory pathway with defined timeframes alters that calculation, and correspondingly increases the administrative importance of a defined release process on the principal’s side.

Implications for parties engaging a remedial contractor

Payment terms are more constrained than many templates assume. Where a standard contract provides for payment 30 or 45 days after a claim, the statutory 20-business-day ceiling applies to the extent of the inconsistency. Reviewing templates against the current Act is a task best completed before a major works contract is executed rather than after a dispute has arisen.

Payment schedules are mandatory. A party disputing a claim must serve a payment schedule setting out the reasons and the amount proposed to be paid, within the shorter of the contract period and 10 business days. Failure to serve one creates liability for the full claimed amount, irrespective of the merits of the underlying dispute.

Retention requires an administered release process. Whoever administers the contract needs a diarised date and a nominated responsible person, because a statutory mechanism now operates on the contractor’s side of the transaction.

Statutory machinery does not substitute for an accurate scope. The most effective protection against a payment dispute on remedial work remains a scope built from investigation, with provisional quantities identified as provisional and a documented variation process agreed before works commence. The statutory process is the remedy applied once those arrangements have failed.

Contracting practice

Commercial terms should be drafted against the Act as currently in force. On remedial projects this means variations documented with the supporting evidence attached and approved before the work proceeds, provisional quantities presented as provisional rather than absorbed into a lump sum, and payment claims served monthly with the supporting records attached. Documentation of that standard resolves most valuation disagreements at the payment schedule stage, before either party needs to rely on the adjudication provisions.

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General information about legislation, not legal advice. This summarises the Act as in force at the date of writing; the transitional application to contracts entered into before 15 April 2026 raises questions outside the scope of this article. Seek advice from a construction lawyer on any specific contract or dispute.

Source: Building and Construction Industry Security of Payment Act 2002 (Vic), as amended — legislation.vic.gov.au