FFrom 15 April 2026, the first tranche of amendments to Victoria’s Security of Payment Act will apply to payment claims and payment schedules regardless of when the contract was entered into.
The most significant practical changes are:
- Reasons for withholding payment or security – any reason for withholding payment that is not included in a payment schedule (or performance security schedule) will be unavailable in adjudication.
- Recourse to performance security regulated (new s 17H) – a party is not entitled to have recourse to performance security (i.e. bank guarantees or retention) unless it first serves a written notice of intention identifying the contractual basis for the call, the amount (if partial) and the circumstances relied on, and waits at least 5 business days (or any longer contractual notice period). These requirements are mandatory and override any inconsistent contractual provisions.
Payment schedules will now set the outer boundary of any future adjudication response. If a reason is not raised at the payment schedule stage, it is treated as waived.
This risk is amplified by broader reforms taking effect at the same time, including:
- Statutory Rights to Claim – Subcontractors / contractors now have a statutory right to serve a payment claim for work carried out or goods and services supplied: on and from the last day of each named month; or earlier and more frequently if the contract allows; and up to 6 months after practical completion or termination;
- Release of security – a new statutory right to claim release of retention and bank guarantees or bonds, once the works under the contract are complete or following defects liability period expiry;
- No more excluded amounts – abolition of excluded amounts and claimable variations, meaning a much wider range of issues must now be addressed in payment schedules, including delay costs, liquidated damages (payment schedule set-off), latent conditions and damages for contract breach;
- Payment Terms – payment terms are capped at 20 business days from the date of the payment claim, and security must be released within 20 business days of defined trigger events (such as completion or defects liability period expiry). Pay-when-paid provisions are also expanded and still prohibited – if a contract ties payment or release to upstream contracts, or provides for a period longer than 20 business days, the period reverts to 10 business days from the claim date;
- Payment and security claims – relaxation of strict timing rules for payment claims and performance security claims, reducing technical knock‑outs and shifting focus to substantive assessment;
- Restriction on time bars – expanded adjudicator discretion to, and, critically, court and arbitration final determinations to, refuse enforcement of unfair notice‑based time bars where not reasonably possible to comply or unreasonably onerous (applies to entitlements to base work and critically, variations, extensions of time and performance security release); and
- Service of SOPA documents – simpler service rules, including express support for electronic service.
Two further reforms dealing with performance security procedures for adjudication and adjudicator payment rules have been deferred until September 2026 and may still change before commencement.
Regarding performance security, recourse is still very difficult to prevent, but there are rare cases such as where there is no contractual entitlement or no arguable case (i.e. the contractor has paid the principal the sum subject of the call).
Depending on the contract, one possible response to a threatened call may be to unconditionally pay, or offer to pay, the secured amount in cash in exchange for release of the security, as considered in L.U. Simon Builders Pty Ltd v Cardigan Commercial Pty Ltd (No 2) [2026] VSC 33. The Court there held that the contract contained an implied term entitling the contractor to pay the principal the full value of the bank guarantees in cash, following which the principal was required to release the guarantees and no replacement security was required, and the contract did not exclude such implied term. See also: Kronstruct Pty Ltd v UAG Toorak Pty Ltd & Anor [2026] VSC 213
For contractors, principals and contract administrators alike, these amendments materially change how payment claims are prepared, defended and managed day‑to‑day particularly at the payment schedule or the new performance security schedule stages.
If you would like to discuss what this means for your projects, payment schedule templates or contract administration processes, please contact our Construction and Infrastructure team.