Security of Payment Act NSW: how tradies get paid

Late payment is one of the biggest pressures on tradespeople and subcontractors. The Security of Payment Act gives you a fast, structured way to recover what you are owed. This guide explains how it works in NSW.

What the Act does

The law is the Building and Construction Industry Security of Payment Act 1999 (NSW). It gives anyone who carries out construction work, or supplies related goods and services, a statutory right to progress payments. It also gives you a quick path to enforce that right without a drawn-out court case.

The Act covers most construction work in NSW. Some work is excluded, so check whether your contract falls within it.

Making a payment claim

The process starts with a payment claim. A valid claim must meet a few requirements.

The claim must be in writing. It must state the amount you are claiming. It must describe the construction work or the goods and services it relates to. It must be served the way the contract requires, or on or after the reference date. You should record the date the other party receives it.

A reference date is the date set in the contract for making a claim, or if the contract sets none, the last day of each month. You can make one claim per reference date, and you can only claim for work carried out in the past 12 months.

If your contract is connected with residential building work, a subcontractor's claim must state that it is made under the Act.

The payment schedule

Once you serve a claim, the other party can respond with a payment schedule. This is their reply, setting out what they propose to pay and why, if it is less than the claim.

They have a maximum of 10 business days to provide a payment schedule, unless the contract requires a shorter time. If they do not provide one, and do not pay, they become liable to pay the full claimed amount.

When payment is due

Unless the contract sets an earlier date, payment is due within set periods after the claim.

A head contractor claiming from the principal must be paid within 15 business days. A subcontractor must be paid within 20 business days, or within 10 business days for certain exempt residential work.

If you are not paid

If the other party does not pay, and did not serve a payment schedule, you can recover the amount as a debt, or you can apply for adjudication. If they did serve a schedule but did not pay the scheduled amount, you can also enforce it.

Adjudication is the fast track. An independent adjudicator decides how much is payable, usually within a short timeframe. The timeframes for applying and responding are strict, so do not delay, and get advice early. NSW Fair Trading has guidance on the process.

Frequently asked questions

Who can use the Security of Payment Act? Anyone who carries out construction work or supplies related goods and services under a construction contract in NSW.

How long does the other side have to respond? They have a maximum of 10 business days to serve a payment schedule, unless the contract sets a shorter time.

What if they ignore my claim? If they do not serve a payment schedule and do not pay, they are liable for the full claimed amount, and you can recover it as a debt or go to adjudication.

Is adjudication the same as going to court? No. Adjudication is a faster, cheaper process run by an independent adjudicator, with strict timeframes.

Keep reading

• Tradespeople
• How to make a payment claim under the Security of Payment Act
• Client won't pay? Your options as a tradesperson in NSW

This article contains general information only and is not legal advice. For advice about your situation, please contact us. Liability limited by a scheme approved under Professional Standards Legislation.