Australia’s security of payment landscape: An introduction, overview and comparative analysis
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Insight Article 07 October 2026 07 October 2026
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Global
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Regulatory movement
Cash flow has long been described as the lifeblood of the construction industry. Despite this, construction projects are often characterised by one-sided contractual arrangements, payment delays, disputed variations and other claims.
Against that backdrop, each Australian State and Territory has enacted security of payment legislation aimed at improving payment practices within the industry. The legislation provides contractors, subcontractors, consultants and suppliers with a rapid and relatively inexpensive mechanism for recovering progress payments, without the need to resort to more time-consuming and costly alternatives such as litigation or arbitration.
Few statutory regimes have had a greater practical impact on the Australian construction industry than security of payment legislation. Introduced to address chronic cash flow problems and delayed payments, these regimes have fundamentally altered the way construction disputes are managed, and progress payments are recovered across Australia. They confer statutory rights and impose statutory obligations that generally cannot be contracted out of and which significantly influence project administration, payment processes, dispute management and commercial risk allocation.
Despite a common purpose and broad similarities in approach, the various security of payment regimes operating across Australia are not uniform and important differences remain between jurisdictions.
The security of payment legislative regime across Australia.
Australian security of payment legislation generally follows either the East Coast model (NSW, VIC, QLD, SA, TAS and ACT), which is centred on statutory payment claims and payment schedules, or the West Coast model (WA former Act and NT), which is centred on the concept of a payment dispute. The new WA Act largely adopts the East Coast model while retaining some distinctive features.
The below table lists the security of payment legislation and regulations in each Australian State and Territory (in order of when they came into force):
When does security of payment legislation apply?
Construction work and supply of related goods and services
Security of payment legislation generally applies to construction contracts (whether written, oral or partly written and partly oral) under which a party undertakes construction work or agrees to supply related goods and services. While the precise definitions vary between jurisdictions, these concepts are generally defined broadly and encompass a wide range of activities.
“Construction work” generally includes most building, engineering and civil construction activities, as well as work ancillary to those activities. This commonly extends to preparatory works, fit-out, electrical and instrumentation works, commissioning activities and post-construction activities such as site restoration and landscaping.
“Related goods and services” generally include the supply of materials, components, plant, equipment, labour hire services and professional services specifically connected with construction work, including design, engineering, quantity surveying and project management services.
Notwithstanding the broad scope of these definitions, each Australian State and Territory has adopted a slightly different approach to the classes of work and industries falling within the protection of its security of payment legislation. Accordingly, all jurisdictions contain express exclusions from the operation of their legislation, although the nature and extent of those exclusions vary considerably.
Common exclusions include certain residential building contracts, the construction of watercraft, drilling for oil or natural gas, and particular mining and resources-related activities. Determining whether a contract falls within the statutory definition of construction work, or instead falls within one of the recognised exclusions, is often a critical threshold issue in any security of payment dispute.
The practical significance of these exclusions varies considerably. In some jurisdictions they affect relatively narrow classes of projects, whereas in others they can have substantial consequences for particular industries, including the energy and resources sectors.
Western Australia’s resource sector exclusion
A further distinction of particular importance to participants in Western Australia's resources sector arises under the Construction Contracts (Former Provisions) Act 2004 (WA) (2004 Act). Although the 2004 Act was repealed and replaced by the Building and Construction Industry (Security of Payment) Act 2021 (WA) (2021 Act), it continues to apply to construction contracts entered into before 1 August 2022.
Under the 2004 Act, works involving the fabrication or assembly of plant used for extracting or processing oil, natural gas, mineral-bearing substances and certain related materials were excluded from the definition of "construction work", and therefore fell outside the statutory adjudication regime. Although the exclusion extended beyond mining projects to other parts of the resources sector, it became commonly known as the “mining exclusion”.
The mining exclusion was not carried forward into the 2021 Act. As a result, construction contracts entered into on or after 1 August 2022 are generally able to access the statutory regime irrespective of whether the works are associated with mining, oil and gas or other resource projects.
The exclusion nevertheless continues to have practical significance. Large resources projects commonly involve long-term contracts entered into before 1 August 2022, meaning that the 2004 Act, and its mining exclusion, may continue to govern parties' rights and remedies for those legacy contracts. For parties involved in Western Australian resources projects, identifying which statutory regime applies is often the first and most important step in determining whether security of payment rights are available at all.
Which Security of Payment act applies?
The security of payment legislation that applies to a construction contract is generally determined by the State or Territory in which the relevant construction work is to be carried out. This is ordinarily the case irrespective of where the contract was entered into or whether the contract is expressed to be governed by the laws of another State, Territory or country. The issue is therefore of particular importance for principals, contractors and suppliers operating across multiple jurisdictions or from overseas.
For construction contracts involving related goods and services, the applicable legislation is generally determined by the State or Territory where the construction works to which the goods and services relate are to be undertaken, irrespective of where the services are performed and whether or not the goods are supplied to the construction site or elsewhere. Tasmania is a notable exception to this rule.
Importantly for parties working on projects in waters adjacent to Western Australia, the 2021 Act contains provisions expressly extending its operation to construction works undertaken within the territorial limits of Western Australia as well as to offshore projects beyond those territorial limits if the contract is governed by the laws of Western Australia. Taken together with the removal of the mining exclusion, this has the potential to capture a wide variety of contracts relating to offshore oil and gas projects, including contracts involving construction, maintenance, alteration works (such as for CCUS projects), decommissioning and contracts for goods and services relating to those works (irrespective of where those goods or services are supplied from).
For parties involved in offshore energy and resources projects connected with Western Australia, the applicability of the 2021 Act should therefore be considered at an early stage, as it may confer statutory rights and obligations that would not otherwise arise under the parties' contractual arrangements.
Rapid Adjudication
The central feature of every Australian security of payment regime is a statutory adjudication framework that provides for rapid determination of payment disputes with the primary aim of keeping cash flowing through the contractual chain by enforcing timely payment and sidelining lengthy or complex disputes.
Adjudication operates on a "pay now, argue later" basis. It represents a deliberate trade-off between speed and efficiency on the one hand, and contractual and legal precision on the other. The process typically involves an independent adjudicator reviewing the payment claim, adjudication application and adjudication response, primarily on the documents, and determining whether an amount is payable (or security should be returned).
Once an adjudication determination is made, the successful claimant can generally obtain an adjudication certificate and register the amount as a judgment debt, allowing enforcement through the ordinary court enforcement processes.
Importantly, an adjudication determination is interim only and does not finally determine the parties' substantive contractual rights. If either party is unsatisfied with the determination, they retain their full rights to go to court or use any other dispute resolution mechanisms under the contract. In the meantime, the determination is binding and enforceable and any payments ordered must be made on an interim “on account” basis (subject to any decision or award on the parties’ final rights).
Three important features of adjudication assist in keeping money flowing down the contracting chain:
- Rapid (and strict) timeframes for each step of the adjudication, to ensure the process is completed quickly. These timeframes differ in each jurisdiction (and are set out in the table below).
- The ability to rapidly enforce an unpaid adjudication determination. Each Australian State and Territory provides for enforcement of adjudication determinations as court judgments via court debt recovery mechanisms.
- Limitations on an aggrieved party’s ability to review or resist enforcement of an adjudication determination, which would otherwise derail a quick and interim resolution.
Limitations on an aggrieved party’s ability to resist enforcement
Security of payment legislation generally provides limited avenues for a party to review or otherwise challenge an adjudicator’s determination, but there are some exceptions:
- The 2021 Western Australian Act (which applies to contracts entered into after 1 August 2022) provides for the appointment of a “review adjudicator” to review first instance adjudication determinations in certain circumstance and under strict timeframes.2
- The Northern Territory Act, and the former 2004 Western Australian Act, also provide a process by which a party can apply to the State Administrative Tribunal for review, but only of an adjudicator’s decision to dismiss an adjudication application without making a determination, not the adjudication determination itself.
- The Australian Capital Territory Act provides a limited right of appeal on a question of law, with leave of the Supreme Court (or the parties' consent), where there is a manifest error of law or a determination of the issue is likely to substantially increase legal certainty.
Otherwise, the usual course to resist or overturn a determination is to apply for judicial review of the adjudication determination before the relevant Supreme Court on the basis that the adjudicator fell into jurisdictional error in making the determination.
While courts in Australia consistently quash determinations which are afflicted by jurisdictional error (whether in whole or in part), it is generally accepted that security of payment legislation authorises adjudicators to “have a go” at making a determination and to make errors of fact and law without the courts intervening or overturning the determination, provided those errors do not extend to an adjudicator exceeding the scope of their jurisdiction.
In this regard, the majority of the High Court of Australia in two appeals heard concurrently, namely Probuild3 (concerning the New South Wales Act) and Maxcon4 (concerning the South Australian Act), held that those two Acts (which are materially similar) demonstrated a clear legislative intention to oust the supervisory jurisdiction of the courts with respect to non-jurisdictional errors of law. Those decisions have subsequently been influential across Australia and are regularly cited in support of the proposition that adjudication is intended to provide a rapid interim determination, rather than a process directed towards legal perfection.5
Key adjudication timeframes
Although the mechanisms triggering adjudication differ between jurisdictions, adjudication is generally available where a claimed amount is disputed, not paid in full, or where a required payment schedule or equivalent response is not provided (subject to any applicable notice requirements).
Importantly, however, several jurisdictions impose formal requirements regarding the content or endorsement of payment claims, and failure to comply may affect a claimant's access to adjudication. The principal exceptions are the Northern Territory, Queensland and the 2004 Western Australian Act, none of which requires a payment claim to contain a statutory endorsement as a precondition to adjudication.
The table below provides an overview of the key adjudication timeframes and review mechanisms applicable in each Australian State and Territory:
| Time limit for making an adjudication application | Time limit for Adjudication Response | Time limit for Adjudication Determination | Time limits – review adjudicator (WA only) | |
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New South Wales |
Within 10 business days after:
Within 20 business days after the due date for payment of an unpaid scheduled amount. |
The later of either:
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Within 10 business days after receiving the response, the expiry of the response period, or the adjudicator’s appointment (depending on the circumstances), unless the parties agree to an extension. | N/A |
| Victoria | Within 10 business days after:
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The later of either:
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Within 10 business days after the expiry of the response period or the adjudicator’s appointment (whichever is later). The parties can agree to an extension of up to 20 business days. |
N/A |
| Western Australia (contracts before 1 August 2022) | Within 90 business days after the payment dispute arises.6 | Within 10 business days after receiving the application. | Within 10 business days after receiving the response or the expiry of the response period (depending on the circumstances). | N/A |
| Western Australia (contracts after 1 August 2022) |
Within 20 business days after the entitlement to apply arises. The entitlement arises if:
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Within 10 business days after receiving the adjudication application. |
Within 10 business days after receiving the response, the expiry of the response period, or the adjudicator’s appointment (depending on the circumstances). The parties can agree to an extension of up to 20 business days. |
An application must be made within 5 business days of receiving the determination.The review application and supporting documents must be given to the other party within 1 business day of making the application. A review response must be made within 10 business days of receiving the review application. A review adjudicator must determine the application within 10 business days after receiving the response or the expiry of the response period, unless the parties agree to an extension (up to 10 business days). |
| Northern Territory | Within 65 business days after the payment dispute arises.7 | Within 15 business days after receiving the application. |
Within 10 business days after receiving the response or the expiry of the response period (if no response is received). The adjudicator may further extend by 5 days if satisfied it is necessary to ensure procedural fairness. |
N/A |
| South Australia | Within 10 business days after:
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The later of either:
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Within 10 business days after receiving the response, the expiry of the response period, or the adjudicator’s appointment (depending on the circumstances), unless the parties agree on an extension. | N/A |
| Tazmania | Within 10 business days after:
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The later of either:
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Within 10 business days after receiving the response, the expiry of the response period, or the adjudicator’s appointment (depending on the circumstances), unless the parties agree on an extension. | N/A |
| Australian Capital Territory | Within 10 business days after:
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The later of:
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Within 10 business days after receiving the response, the expiry of the response period, or the respondent’s receipt of the application (depending on the circumstances), unless the parties agree on an extension. | N/A |
| Queensland |
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For payment claims less than $750,000, the later of:
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Within:
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N/A |
Additional protections afforded under security of payment legislation
In addition to adjudication, security of payment legislation provides various other protections which differ across the jurisdictions (as does the nature and extent of the protections). Some of the more common protections include the following:
- A statutory entitlement to receive progress payments for persons performing construction works (independently of, and in addition to, any contractual right).
- Statutorily imposed payment mechanisms and minimum timeframes for when parties must make and respond to payment claims (often by way of a “payment schedule”) and when payments must be made.
- Provisions making a respondent liable to pay the full amount of the payment claim if the payment schedule is not issued in time and entitling the claimant to recover any unpaid scheduled amounts (or unpaid claimed amounts where no payment schedule was provided) as a debt due via the court.
- Prohibitions against “pay if paid / when paid” provisions. These are contractual provisions which purport to make payment, or the release of retention monies or performance security, contingent upon payment being received upstream or in the context of a different contract.
- A statutory right to suspend work for non-payment if certain pre-conditions are met, such as where scheduled amounts or amounts determined to be payable under the legislation are not paid in time.
Some Australian jurisdictions have gone beyond these common protections and introduced other novel protections. While these are not set out exhaustively, these protections include the following:
- The Queensland regime contains an extensive trust account framework, requiring certain parties to establish a project trust account for project funds to be paid and held on trust for subcontractors and other beneficiaries, and a separate retention trust account for eligible retention amounts. The 2021 Western Australian Act (applying to contracts after 1 August 2022) and the New South Wales Act also require parties to hold eligible retention monies in dedicated trust accounts, although the scope of those regimes is narrower than in Queensland.
- The 2021 Western Australian Act and the Victorian Act (following amendments earlier this year) allow adjudicators, courts and arbitrators (as well as experts appointed to determine a matter under a contract) to declare notice-based time bars in the contract to be unfair and of no effect if compliance is not reasonably possible or would be unreasonably onerous.
- Under the 2021 Western Australian Act, a party is not entitled to have recourse to performance security under the contract unless notice has been given to the other party and a period of 5 business days (or any longer periods specified under the contract) has passed.
As a result, parties cannot assume that carefully drafted contractual provisions will prevail where they are inconsistent with the applicable security of payment legislation. The legislation operates as a mandatory overlay to the parties' contractual arrangements.
Key protections afforded by each State and Territory
| Jurisdiction | Statutory entitlement to receive progress payments | Minimum requirements imposed on payment mechanisms | Prohibition of ‘pay if / when paid” clauses | Entitlement to recover unpaid / unscheduled amounts as a debt due | Entitlement to suspend works due to non-payment | Requirement for retention monies to be held in a dedicated trust account | Prohibition of unfair notice-based time bars |
| New South Wales | Yes | Yes | Yes | Yes | Yes | Yes (for contracts over $20 million) | No |
| Victoria | Yes | Yes | Yes | Yes | Yes | No | Yes |
| Western Australia (contracts before 1 August 2022) | No | No | Yes | No | Yes (of adjudication determinations only) | No | No |
| Western Australia (contracts after 1 August 2022) | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Northern Territory | No | Yes | Yes | No | Yes (of adjudication determinations only) | No | No |
| South Australia | Yes | Yes | Yes | Yes | Yes | No | No |
| Tasmania | Yes | Yes | Yes | Yes | Yes | No | No |
| Australian Capital Territory | Yes | Yes | Yes | Yes | Yes | No | No |
| Queensland | Yes | Yes | Yes | Yes | Yes | Yes (and can also extend to project funds) | No |
Common traps and pitfalls for parties to construction contracts
While each of the Australian security of payment Acts share a common objective of maintaining cash flow in the construction industry, their procedural requirements are often strict and unforgiving. It is not uncommon for parties to lose what would otherwise be valid claims or defences due to relatively minor procedural or administrative errors. While the consequences are generally interim in nature and do not affect the parties’ final substantive rights, this can have a significant practical and commercial impact in the short term.
Some common traps and pitfalls are set out below:
- Parties may not appreciate their contract is caught by security of payment legislation or that they are subject to a different security of payment regime than that which they understood to apply. Interstate or overseas service providers and suppliers in particular may be unaware of the application and effect of the legislation.
- Participants involved in resource projects located in Western Australia (including offshore projects) may be caught out following the removal of the “mining exclusion” under the 2021 Western Australian Act, as well as the extension of the operation of that Act to waters adjacent to Western Australia.
- Parties can overlook the fact that security of payment legislation governs (and can alter) the express wording of their contracts in key areas, including the prohibition of certain terms (such as “pay if paid / when paid” clauses or unfair terms) and the operation of the payment mechanism. This can easily lead to non-compliance with contractual and statutory requirements which in turn can have widespread ramifications for parties, including limiting recourse to adjudication and the running of valid defences in adjudication (or any defence at all), or requiring parties to pay the full amount claimed despite having valid defences and objections to entitlement.
- Non-compliance with the requirements of the contract or security of payment requirements may take many forms but commonly includes failing to comply with time limits, service requirements or ensuring payment claims, payment schedules, adjudication applications and adjudication responses are in the prescribed form.
- The step-change from a project-level payment dispute to adjudication proceedings (which might include lawyers preparing the adjudication application and supporting submissions) can happen very quickly and often catches respondents by surprise, with the time limits for responding to adjudication applications often being very short.
- It is important for parties receiving payment claims to have procedures in place to ensure that payment schedules are prepared on time and include comprehensive reasons for rejecting claims, back-charges or sets-offs (as the defences available in adjudication will generally be limited to the reasons provided in the payment schedule). It is also important to have personnel available who can very quickly explain those reasons and locate any relevant supporting documents and records to support any adjudication response.
Conclusion
Security of payment legislation has fundamentally reshaped the construction industry across Australia. While each State and Territory has adopted its own regime, all are directed towards the same core objective: maintaining cash flow within the contractual chain through the prompt resolution of payment disputes and the provision of effective interim remedies.
The similarities between the various regimes should not, however, obscure the important differences that exist between jurisdictions. Questions such as whether the legislation applies to a particular contract, the procedural requirements for making and responding to payment claims, the availability of adjudication, and the scope of statutory protections can vary significantly depending on the location and nature of the project.
For participants in the construction, infrastructure, energy and resources sectors, a thorough understanding of the applicable security of payment regime is therefore essential. The legislation does not merely provide an additional avenue for dispute resolution; it imposes mandatory rights, obligations and procedures that can materially affect parties' commercial positions and bargaining power.
Ultimately, security of payment disputes are frequently won or lost on procedural compliance rather than substantive entitlement. Parties that understand the applicable regime and implement robust contract administration, payment and record-keeping processes will be best placed to preserve cash flow, manage risk and protect their legal rights.
Please do not hesitate to contact the authors with any questions or comments.
1The Tasmanian Act applies to contracts for the supply, by a party in Tasmania, of goods or services related to construction works even if those construction works are carried out outside of Tasmania.
2The Victorian Act formerly contained a review adjudication mechanism, but this was recently repealed.
3Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
4Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
5The exception being the Australian Capital Territory Act, which contains a qualified right to appeal a determination to the Supreme Court.
6A payment dispute arises when a payment claim is rejected or wholly or partially disputed, an amount is not paid by the time payment is due under the contract, or security is not returned by the time security is due to be returned under the contract.
7A payment dispute arises when a payment claim is rejected or wholly or partially disputed, an amount is not paid by the time payment is due under the contract, or security is not returned by the time security is due to be returned under the contract.
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