Building Legislation Amendment Act 2025 (Vic): Key Changes to Security of Payment and Construction Contracts September 29, 2026

The Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Vic) passed Parliament on 30 October 2025 and commenced on 15 April 2026 (‘commencement date‘), amending the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).

These reforms apply to all of the construction contracts in Victoria, including those which were entered into before the commencement date. They arose from a 2023 Parliamentary Inquiry into non-payment of subcontractors, which made 28 recommendations which were all accepted by the Victorian Government.

Part 1

1. Removal of ‘Excluded Amounts’

Victoria was the only Australian state that barred certain claims from adjudication. These were called the “excluded amounts” regime which prevented claimants from pursuing disputed variations, latent condition costs, delay damages, acceleration costs, and extension of time entitlements through the SOP process. Those restrictions are now gone. From the commencement , a progress payment claim can generally be made for any construction work or associated costs under the contract, and respondents can equally assert a wider range of reasons for withholding payment.

2. Monthly Claims Replace Reference Dates

The concept of “reference dates” which were contractual dates that triggered the right to make a payment claim, generated substantial litigation in Victoria and it has now been abolished. In its place, claimants have a default right to submit a payment claim on and from the last day of each calendar month. Parties may agree to an earlier date, but cannot push it later. A payment claim submitted before the permitted date is no longer invalid; it is treated as served on the earliest permitted day. The time limit for submitting claims has also been extended from three months to six months after completion.

3. Capped Payment Terms

Construction contracts in Victoria can no longer specify payment terms exceeding 20 business days after a payment claim is served. This is a first for Victoria and addresses longstanding concerns about principals imposing lengthy payment periods on subcontractors.

4. Christmas Shutdown Blackout

Victoria was the only state that did not pause SOP deadlines over the industry’s customary Christmas shutdown. The period 22 December to 10 January is now excluded from the definition of “business day”, meaning time does not run under the SOP Act during this period.

Part 2

1. New Performance Security Claim Process

The Amendment Act introduces a formal statutory process for claiming the release of performance security, this is broadly defined to include performance bonds, bank guarantees, and retention money. A claimant can now serve a performance security claim, the respondent must respond by way of a performance security schedule. Unresolved disputes can then proceed to adjudication or court.

Critically, any party intending to call on performance security must first serve a notice of intention at least 5 business days before doing so. The notice must identify the contract and the amount to be called, and the grounds relied upon. This requirement applies to all construction contracts and cannot be contracted out of. Many existing contracts do not require any prior notice, those contracts are now overridden by statute.

2. Unfair Notice-Based Time Bars

Notice-based time bar clauses, which extinguish claims if notice is not given within a specified period, can now be declared unfair and of no effect by an adjudicator, court, arbitrator, or expert, if compliance was not reasonably possible or would be unreasonably onerous. Relevant factors include when the party would reasonably have known of the deadline, how notice was required to be given, and the relative bargaining power of the parties. This reform extends well beyond SOP adjudication and applies across civil proceedings generally.

3. Adjudication: Reasons Must Be in the Payment Schedule

Under the old Act, respondents could introduce new reasons for withholding payment in their adjudication response, even if those reasons were absent from the payment schedule. That is no longer permitted. A respondent’s adjudication response cannot raise any reason that was not stated in the payment schedule. The payment schedule is now the respondent’s only opportunity to articulate its position in full.

4. Easier Enforcement

Adjudication certificates can now be filed in a court of competent jurisdiction as a judgment debt, making enforcement of successful determinations significantly more straightforward than under the old regime.

Key Take Aways

The reforms are already in effect. The industry participants should:

• Review existing contracts to identify claims that were previously excluded but can now be pursued through adjudication
• Update internal processes so that payment schedules address every reason for withholding payment
• Revise contract templates to reflect the 20-business day payment term cap and the monthly claims framework
• Implement the 5-business day notice process before any call on performance security
• Review time bar provisions for vulnerability to unfair time bar challenges”