New Security of Payment Reforms Deliver Faster Payment Timeframes
Following Royal Assent of the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 on 13 November 2025, the reforms commenced on 15 April 2026. This amendment introduced significant changes to Victoria’s Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act), with important implications for our NECA members. In particular, the reforms reshape how payment terms are regulated across the construction sector. They are intended to improve cash flow certainty for contractors and subcontractors alike by limiting extended payment terms and strengthening statutory timeframes for payment.
A key feature of the reforms is the introduction of a strict statutory maximum payment period. The Act now provides that any contractual term requiring payment more than 20 days after a valid payment claim is served will be ineffective to the extent of that inconsistency. In practical terms, this means parties can no longer rely on extended contractual arrangements that delay progress payments beyond this 20 day threshold.
Where a construction contract does not specify a payment timeframe, the Act establishes a default rule requiring payment within 10 business days from the date the payment claim is served. This ensures that even in the absence of clear contractual drafting, claimants are still afforded prompt payment protection.
Importantly, the reforms also confirm the supremacy of the Act over inconsistent contractual provisions. For example, common industry terms such as "40 days after end of month" payment cycles will no longer be enforceable where they exceed the 20-business-day statutory cap. Instead, the statutory timeframe will override and apply accordingly.
These reform changes reflect a broader policy shift towards improving liquidity and reducing payment delays in the construction industry. By limiting the ability of parties to negotiate extended payment terms that may be beneficial only to one party, the reforms aim to reduce disputes, support smaller subcontractors and promote fairer payment practices across supply chains.
Overall, the 15 April 2026 reforms represent a significant tightening of payment protections under Victoria’s security of payment regime, reinforcing the principle that cash flow in construction should be timely, predictable, and legally protected.