What Is the Security of Payment Act?
The Building and Construction Industry Security of Payment Act 2002 (Vic) (SOPA or SOP Act) gives contractors, subcontractors, and suppliers the right to make payment claims for construction work or related goods and services — and to have disputes adjudicated quickly and inexpensively.
The fundamental principle of SOPA is "pay now, argue later." An adjudication under the Act results in an interim determination of the amount payable — the paying party must pay immediately, with the right to raise any substantive disputes through litigation or arbitration later.
Who Can Use the SOP Act?
The SOP Act applies to:
- Contractors performing construction work under a construction contract
- Subcontractors at any tier in the contracting chain
- Suppliers of goods and services related to construction
- Design consultants (architects, engineers) providing services under a construction contract
The Act applies to construction contracts in writing or oral form. It does not apply to domestic building contracts under the Domestic Building Contracts Act 1995 (Vic) where the work is for a homeowner's own domestic dwelling — though it does apply to many other residential projects.
Current SOPA Process (Pre-September 2026)
Serve a Payment Claim
The claimant serves a payment claim on the respondent on or after a reference date. The claim must be identified as made under the SOP Act.
Respondent Serves Payment Schedule
The respondent has 10 business days (or the period in the contract, if shorter) to serve a payment schedule. The schedule must state the amount payable and reasons for any withholding.
Adjudication Application
If the scheduled amount is less than the claimed amount (or no schedule is served), the claimant can apply to an Authorised Nominating Authority (ANA) for adjudication.
Adjudicator Determination
The adjudicator must determine the matter within 10 business days of receiving the respondent's adjudication response. The decision is binding and enforceable as a judgment debt.
Fairer Payments on Jobsites Act 2025 — Key Changes (From September 2026)
1. Excluded Amounts Abolished
Victoria's unique "excluded amounts" regime — which prevented claimants from including latent conditions, time-related costs, changes in regulatory requirements, and non-claimable variations in payment claims — is completely abolished. All of these claims can now be adjudicated.
2. Reference Dates Abolished
The concept of "reference dates" — one of the most litigated issues in Victorian adjudications — is abolished. In its place, claimants have a simple right to make one payment claim per month, from the last day of the month in which construction work was carried out.
3. Payment Terms Capped at 20 Business Days
Contractual payment periods are capped at 20 business days after a payment claim is served. Where the contract is silent, the default payment term is 10 business days. Any contractual provision requiring payment later than 20 business days is void. This directly addresses contractual payment terms of 60–90 days that have been common in major construction contracts.
4. New Performance Security Claims
A new statutory right to claim release of performance security (bank guarantees, retention money, performance bonds) is introduced. Claims can be made under the same process as payment claims — with a 5-business-day notice period required before calling on any performance security.
5. New Reasons Rule — Respondents Bound by Payment Schedule
Respondents can no longer raise new reasons in their adjudication response that were not in the original payment schedule. This fixes a uniquely Victorian problem that benefited respondents who could surprise claimants with new defences during adjudication.
6. Christmas Shutdown — 22 December to 10 January
This period is excluded from the definition of "business day." Victoria was the only state where SOPA timelines continued over Christmas — a source of significant hardship and "Christmas ambushes."
SOPA — Claimant Checklist
- Confirm your contract is a "construction contract" under the SOP Act
- Identify the correct reference date (pre-September 2026) or month-end date (post-September 2026)
- Ensure the payment claim includes the correct identification statement
- Verify service method — email service now expressly authorised
- Set calendar reminders — deadlines are strict and cannot be extended
Frequently Asked Questions — Security of Payment
If a respondent fails to serve a payment schedule within 10 business days of receiving a payment claim (or the contractual period, if shorter), the respondent becomes liable to pay the full claimed amount. The claimant can then either: (a) apply to the court for a judgment as a debt (without adjudication); or (b) apply for adjudication. If the respondent also fails to pay by the due date, the claimant can apply for an adjudication certificate and enforce it as a court judgment. Critically, a respondent who fails to serve a payment schedule loses the right to bring a cross-application or raise defences in the adjudication.
Yes. The SOP Act applies to subcontractors at all tiers of the contracting chain — not just head contractors making claims against principals. If your head contractor is not paying you, the SOP Act is your primary enforcement tool. SOPA adjudication is designed to be used without legal representation, but specialist legal advice can significantly improve the prospects of a successful adjudication, particularly for complex claims or where excluded amounts (before September 2026) or new contract interpretation issues are involved.
Key deadlines under the current SOP Act (pre-September 2026): Payment schedule: 10 business days after receiving a payment claim (or shorter if specified in contract). Application for adjudication (after failed payment schedule): 10 business days after the payment schedule due date. Adjudication response: 2 business days after receiving the application (or 5 business days if the claimant had no schedule). Adjudicator determination: 10 business days after receiving the adjudication response. These deadlines are strict — missing them can result in loss of rights. Seek legal advice immediately when a payment dispute arises.
Adjudication determinations can only be challenged on narrow grounds — primarily jurisdictional error or denial of natural justice. They cannot be challenged on the merits. The proper recourse if you believe the adjudicator reached the wrong decision is to seek final determination through litigation or arbitration (the "argue later" in "pay now, argue later"). However, in the Supreme Court case of 1559 High Street v Camillo Builders [2025] VSC 244, the Court confirmed that the SOP Act's enforcement mechanism is not inconsistent with the Australian Consumer Law — resolving uncertainty about whether ACL rights could be used to challenge or delay adjudication enforcement.
Yes — with limited exceptions. The Fairer Payments on Jobsites Act 2025 will apply retrospectively to all construction contracts in existence at the time of commencement (by 1 September 2026). The only exceptions are narrow: payment claims already served and adjudications already commenced before commencement are governed by the old rules. This means all parties to existing Victorian construction contracts need to review their contract terms and processes before September 2026 — particularly around payment terms, performance security arrangements, and notice provisions.
An Authorised Nominating Authority (ANA) is an organisation authorised by the BPC to nominate adjudicators for SOP adjudications. ANAs in Victoria include the Resolution Institute (AINEX), Institute of Arbitrators and Mediators Australia (IAMA), and Adjudication Resolution Services (ARS). To start an adjudication, the claimant lodges an adjudication application with an ANA, which then nominates an adjudicator. Under the Fairer Payments reforms, ANAs must make their fee-sharing arrangements with adjudicators publicly available.
General information only. This information is general in nature and does not constitute legal advice. SOPA deadlines are strict. Please contact Matrix Legal immediately if you have a SOPA matter.