In October 2024, the Victorian Government released its response to a Parliamentary Inquiry into employers and contractors who refuse to pay their subcontractors for completed works.
What is a Parliamentary Inquiry?
Parliamentary Inquiries are an opportunity for the general public to provide input in relation to issues being considered by Parliament.
The process is managed by a committee, and inquiries are referred to a committee through a terms of reference (detailed information on what the committee will investigate, and when a report is due).
Building and Construction Industry Security of Payments Act 2002 (Vic)
The Victorian Government has signalled a major overhaul is on its way to the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act). The Government endorsed all 28 recommendations of reform to the SOP Act either in full, in part or in principle. The theme of these recommendations is to simplify and strengthen the regime for claiming payments, add protections for subcontractors and bring Victoria in line with other jurisdictions (particularly NSW and WA). You can access the Government’s response paper here.
Broadly, the Government’s support for reform is founded on issues such as financial insecurity and insolvency, that currently plague the construction industry. In particular, the Government’s report cited poor payment and other contracting practices in the building industry that “take advantage of the highly fractured nature of the industry in Australia (where subcontractors complete over 80 per cent of construction work…)”.
Snapshot of key recommendations
While each of the 28 recommendations are important, we consider the following to be key:
- Expanding the SOP Act to apply to payment disputes between residential homeowners and builders;
- Removal of the concept of ‘reference dates’ from the SOP Act;
- Removal of the excluded amounts regime;
- Standardising payment terms across the construction industry;
- Extending the time limit on claiming payment to 6 months (currently 3 months); and
- New payment terms of no more than 25 business days after the payment claim has been made.
A timeline as to when we can expect these recommendations to be implemented has not yet been published. However, we anticipate that a bill to amend the SOP Act will be introduced in early 2025, at which point, we will have a clearer picture as to how exactly these recommendations will be implemented and when.
Should you require any further information or assistance, or have another building and construction enquiry, contact one of our experienced construction lawyers today at Taurus Legal Management on (03) 9481 2000 or info@tauruslawyers.com.au.