Progress payment changes
The new Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) has made changes to the process for progress payments. These changes will:
- streamline the process
- encourage communication between parties earlier if a dispute arises.
This information outlines the changes for payment claims and payment schedules.
A payment claim is a written document requesting payment for construction work or the supply of related goods or services. Only one payment claim can be made per reference date.
Previously, a payment claim had to include specific wording indicating it was made under the legislation, (known as ‘endorsement’). Without this wording, the respondent wasn’t required to issue a payment schedule and the claimant couldn’t proceed to adjudication for a dispute about that payment claim.
Under the BIF Act, payment claims don’t need to state that they’re made under the Act. A claim or invoice from a contractor, consultant or supplier is considered a payment claim under the BIF Act if it’s a written document that:
- identifies the construction work (or related goods and services)
- states the amount claimed
- requests the claimed amount be paid.
The protections of the legislation will apply automatically.
Note: There can still only be one valid payment claim for each ‘reference date’ and the payment claim may be provided on or after the applicable ‘reference date’.
Responding to payment claims - payment schedules
A payment schedule is a written response to a payment claim, which:
- tells a contractor the amount they’ll be paid
- provides reasons why the amount may be less than the amount claimed.
Under the BIF Act, a respondent must ‘respond’ to all payment claims and invoices for construction work or the supply of related goods and services.
When the respondent receives a payment claim, they must ‘respond’ by either:
- paying the full amount claimed by the due date – if they agree with the amount claimed
- giving the claimant a payment schedule (and ensuring the scheduled amount is paid by the due date) – if they don’t agree with the amount claimed.
Failing to issue a payment schedule within the time frame (and then also not paying the claimed amount in full by the due date) is an offence and a maximum of 100 penalty units may apply.
Additionally, if the respondent fails to issue a payment schedule, they:
- become liable for and must pay the full amount of the payment claim by the due date
- cannot provide a response if the claimant proceeds to adjudication for the payment claim.
Note: There is no ability for a payment schedule to extend the due date for payment.
Reference dates – terminated contracts
Previously, it wasn’t clear whether a reference date existed on or after termination of a contract.
The BIF Act provides a statutory reference date for terminated contracts where none is provided: the reference date is the day the contract is terminated.
This means a claimant can still submit a payment claim under the Act after the contract is terminated.
Note: the BIF Act maintains previous provisions relating to reference dates for claiming regular progress payments. A reference date for a contract is either:
- the date stated in or worked out under the contract
- if the contract doesn’t provide a date, the last day of the month in which the construction work was carried out.
Definitions of work covered by BIF Act
Although the BIF Act makes changes to the progress payment requirements, it makes no change to the definitions of ‘construction work’ and the ‘supply of related goods and services’ (which apply to a very broad range of work).
See sections 65 and 66 of the BIF Act for more information.
Maintenance work associated with the construction, alteration, repair of buildings, structures and works is considered construction work, and covered by the BIF Act progress payment requirements.
As is external and internal cleaning of buildings, structures and works if conducted during construction, alteration, repair, restoration, maintenance or extension.
General property and facilities management services – such as routine cleaning services, waste removal or mowing/gardening – are not considered construction work and not covered by the BIF Act progress payment requirements.
- Last updated:
- 29 November 2019