Attachment D
Security of Payment Guide Understanding progress payments in the building and construction industry
The Security of Payment laws In NSW, people who carry out construction work or supply related goods and services under a construction contract are entitled to receive progress payments for the work or supply of those goods and services. This is regulated by the Building and Construction Industry Security of Payment Act 1999 (NSW) and Building and Construction Industry Security of Payment Regulation 2020 (NSW) (“Security of Payment laws”). The Security of Payment laws are relevant to those involved in contracts within the building and construction industry such as builders, tradies, subcontractors, consultants and suppliers. The purpose of the Security of Payment laws is to reduce the risk of insolvency in the building and construction industry in NSW by ensuring members of the contractual chain are paid for the work or services they provide. What do the Security of Payment laws apply to? Any construction contract. A construction contract that is written or oral. A construction contract that is partly written and partly oral. A construction contract that says it is to be governed by a law of a State or Territory outside of NSW but the work is carried out in NSW. On and from 1 March 2021, owner occupier construction contracts. What are owner occupier construction contracts? Owner occupier construction contracts are construction contracts for residential building work on any premises or part of the premises where the contracting party resides or proposes to reside in. For example, an home owner engaging a builder to build their home.
What’s not covered under Security of Payment laws? x A construction contract where the work is performed outside of NSW. x A construction contract for goods and services supplied in respect of construction work outside of NSW. x A construction contract that regulates an employer/employee relationship. x A construction contract that relates to a financial loan. What is a progress payment? A progress payment includes: • The final payment for construction work carried out or the supply of the goods/ services under the construction contract, or • A single or one-off payment for carrying out construction work or the supply of goods/ services under the construction contract, or • A payment based on an event or date (“milestone payment”). This does not prevent the building contractor making one payment claim for a progress payment in any particular month for construction work carried out or for related goods and services supplied in that month. How is a progress payment amount determined? The progress payment amount is usually set out in the construction contract. If the progress payment amount is not set out in the construction contract, the amount will be calculated based on the value of the construction work undertaken or the goods/service provided. When is a progress payment due for payment? A progress payment should be made in accordance with the terms of the applicable construction contract.
Fair Trading Security of Payment Guide | February 2021
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