Changes to payments for construction
In November 2017, the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) introduced reforms to ensure Queenslanders who work in our building and construction industry are paid for the work they do.
Some of the BIF Act provisions replace the Building and Construction Industry Payments Act 2004 (BCIPA) and the Subcontractors Charges Act 1974, which were repealed on 17 December 2018.
On 17 December 2018, BIF Act provisions commenced that relate to:
- progress payments
- subcontractors’ charges
- requirements relating to retention monies and security (to be included in the Queensland Building and Construction Commission Act 1991).
These changes affect the payment of construction work and supply of related goods and services in Queensland.
New provisions were also introduced to the Queensland Building and Construction Commission Act 1991 through the BIF Act from 17 December 2018. These provisions introduce new penalties for withholding retentions past the end of the defects liability period without a reasonable excuse apply.
Read about the defects liability period notice.
The former situation
In Queensland, the BCIPA provided the requirements for the payment of construction work and supply of related goods and services.
- created the right to receive and make progress payments
- provided the ability to proceed to adjudication if a payment dispute arises
- provided payment time frames and other requirements where a contract provides void provisions or doesn’t provide for them, such as:
- the due date for payment of a payment claim
- the time frame for providing a payment schedule
- the reference date.
Under the BCIPA claimants had to state that their payment claim was made under the legislation to be protected by the legislation (known as endorsement).
Additionally, the definition of construction work and the supply of related goods and services was quite broad, e.g. construction work could be a small paint repair job or an entire building. No minimum or maximum monetary values applied to progress payment requirements.
The current situation
The BIF Act has changed the current requirements for payment claims, subcontractors’ charges and adjudication.
The BIF Act adopts the same framework and principles of BCIPA and continues to use the definitions of ‘construction work’ and the ‘supply of related goods and services’ (which apply to a very broad range of work).
However, the requirements of the legislation will now apply to all payment claims rather than when a contractor opts to use the requirements through endorsement of a payment claim. It also provides a faster, more streamlined adjudication process where disputes arise.
- All claims for payment are the subject of the BIF Act, including claims that satisfy the requirements outlined in the legislation.
- Unless paying a claim in full by the due date, a payment schedule needs to be issued within 15 business days from receiving a payment claim (or earlier if required under a contract).
- All claims for payment must be paid on time. (This is not a new requirement.)
These requirements apply to all payment claims issued from 17 December 2018, including for existing contracts entered into before the legislation was in force.
Below you’ll find more details about changes to payment claims, payment schedules, adjudication, and subcontractors’ charges.
A payment claim is a written document requesting payment for construction work or the supply of related goods or services that:
- identifies the construction work or related goods and services
- states the amount claimed
- requests that the claimed amount be paid.
A payment claim is made after a valid reference date, either provided for in the contract or otherwise per default provisions in the BIF Act.
Under the BIF Act, payment claims no longer need to state that they’re made under the legislation (endorsement). Every payment claim could be considered made under the Act where it contains the appropriate information and has a valid reference date.
A payment schedule is only required if the recipient of a payment claim is not intending to pay the payment claim in full by the due date.
A payment schedule is a written response to a payment claim, which:
- identifies the invoice or payment claim that it’s responding to
- tells a contractor the amount they’ll be paid, if any
- provides reasons why the amount may be less than the amount claimed.
Under the BIF Act:
- a payment schedule must be provided in response to every payment claim unless paying the full amount of the claim by the due date
- the payment schedule must be provided within 15 business days of receiving a payment claim or earlier if stated in the contract - unless the claim is paid in full by the due date.
- there is a penalty of 100 penalty units may apply for non-compliance.
If the recipient of a payment claim only intends on paying part of the payment claim, the part payment must be made by the due date, as well as giving a payment schedule. The due date for payment may differ from the timeframe for when a payment schedule must be issued.
Adjudication is a quick and low-cost way to resolve a payment dispute, first established under the BCIPA.
The BIF Act streamlines the processes for adjudication. Under these changes:
- the claimant doesn't need to notify the other party that they intend to go to adjudication
- there is no ability to
- issue an adjudication response if a matter goes to adjudication and no payment schedule was issued
- raise new matters not provided for in the payment schedule
- there is a maximum penalty of 200 penalty units if an adjudicated amount isn’t paid within 5 business days or another time decided by the adjudicator.
Subcontractors’ charges provide a way for unpaid subcontractors to secure a claim over monies owed to them. They can make a charge over money owed to the contractor that’s higher in the contractual chain (including other subcontractors).
The BIF Act:
- modernises and simplifies the subcontractors’ charges provisions
- introduces a maximum penalty of 20 units for a contractor who receives a subcontractors’ charge and doesn’t respond within 10 business days.
Defects liability period notice
The BIF Act makes changes to the QBCC Act in relation to retention monies or security held under a building contract.
The BIF Act introduces:
- a statutory default defects liability period of 12 months from the date of practical completion, if a contract doesn’t provide a defects liability period
- penalties for not paying a retention or security to a contractor (without a reasonable excuse) at the end of the defects liability period.
- a requirement that the person withholding a retention under a building contract must provide a notice (in an approved form) of the end of the defects liability period to the person they’re withholding retentions from within 10 business days of the end of the DLP (or 5 business days under a higher subcontract), though this doesn’t apply to a contracting party who enters into a building contract as a principal.