Security of payment frequently asked questions

If you contract directly with a person (not a company or strata scheme owners corporation) who lives or intends to live where the work is to be conducted and the work is:

• residential building work where the total cost of labour and materials is less than $5,000 or
• electrical wiring work or
• plumbing, draining and gas fitting work or
• air conditioning and refrigeration work (except plug-in appliances)

then the Act does not apply to you.

A head contractor who has a construction contract that is not an owner occupier construction contract must use the approved Supporting Statement - Construction Contract form.

A head contractor who has a construction contract that is an owner occupier construction contract must use the approved Supporting Statement - Owner Occupier Construction Contract form.

A company director or other officers of the organisation authorised to make a declaration on behalf of the head contractor.

You must include all payments due and payable at the time you submit a claim for payment to the principal.

No. However, in the supporting statement you must refer to any subcontractors for which an amount otherwise due and payable is in dispute.

No. The Act prohibits ‘pay when paid’ provisions in construction contracts. The provisions of the Act (section 34) override any conditions in a construction contract that contradict the Act.

When you submit a claim for payment to the principal, if an amount is due and payable to a subcontractor that you have engaged then you must declare that all such payments have been made.

No.

The Act sets out the role and powers of the Secretary of the Department of Customer Service, which is delegated to officers from Fair Trading to investigate compliance with the Act. 

Authorised officers may require a company or a person to provide information and documents relating to supporting statements or retention money trust accounts.

There is a maximum penalty of $22,000 for failing to provide a supporting statement with a payment claim to a principal. 

Maximum penalties of $22,000 and/or three months imprisonment apply to knowingly providing false or misleading information in that statement.

The procedures and time frames for making a claim and responding to a claim are under Part 3 of the Act. 

Go to our responding to an adjudication claim page for more information.

If you are a respondent to a payment claim, you must clearly understand your obligations. A respondent must give the claimant a payment schedule within 10 business days of receiving a payment claim. 

If, as the respondent, you fail to provide a payment schedule, you are liable for the total amount claimed. 

If you do not provide a payment schedule, you may find yourself subject to court proceedings without:

• recourse to any cross-claim against the subcontractor; or
• being able to raise any defence relating to the construction contract.

Provide a payment schedule and pay the claimed amount within the timeframe.

If you do not intend to pay the full amount of a payment claim under the Act, you should issue a payment schedule to the claimant no later than 10 business days after you receive the claim. 

Keep a careful record of the date of receipt of the payment claim and the date when the claimant must receive your payment schedule. 

If you don’t serve a payment schedule within time, you are liable for the amount claimed. 

If the claimant sues for recovery of that amount, you cannot raise any defence based on the construction contract or raise any cross-claim.

You only need to keep retention money in a trust account if your contract is valued $20 million or more. 

If your contract wasn’t originally valued over $20 million, but has then increased over that threshold, you only need to keep retention money in a trust account for the contracts entered into after the project value exceeds the $20 million threshold.

Within 10 business days of opening a retention money trust account, you must notify Building Commission NSW in writing of certain details of the account:

• the name of the approved authorised deposit-taking institution (ADI) and the branch, or BSB number of the branch of the approved ADI at which the account has been established
• the name of the account
• the number of the account
• the opening balance of the account, and
• the date the account was opened.

To notify Building Commission NSW of these details, contact SecurityofPayment@customerservice.nsw.gov.au

Note: ADI means an authorised deposit-taking institution approved under section 87 of the Property and Stock Agents Act 2002 or approved by the Secretary by order in writing.

Go to our retention money page for more information.