After several months of speculation, the reforms to NSW
security of payment legislation are now expected to commence this
month. Developers, builders and construction contractors that
operate in NSW must ensure that their procurement, management and
payment systems accommodate the new changes.
The government has announced that the amendments to the
Building and Construction Industry Security of Payment Act
1999 (NSW) will come into effect from 21 April 2014. Formal
proclamation of the commencement of the amendments has not yet
occurred, but the NSW government has revealed the commencement date
on its ProcurePoint website.
It is important that industry participants understand that the
reforms will only apply to contracts entered into on or
after 21 April 2014. Contracts entered into before
proclamation of the Act will not be affected.
In previous In Briefs (links to the right), we outlined four key
reforms featured in the amendment Act. Upon proclamation, two of
the reforms will come into effect immediately:
Maximum payment terms will apply to all construction contracts.
Contracts must provide for payment terms of no more than 15
business days for payments to head contractors and 30 business days
for payments to subcontractors.
A payment claim will no longer need to include an endorsement
that it is made under the Act.
The remaining reforms, which will only come into effect when
regulations are made, are:
payment claims made by a head contractor include a supporting
statement declaring that all subcontractors have been paid what is
due and payable; and
head contractors deposit any retention money withheld from
subcontractors into a trust fund.
Exempt residential construction contracts will still not attract
the Act's operation. The reforms will not apply to Contracts
that are connected with such exempt residential construction
The government has indicated on the ProcurePoint website that
regulations for the supporting statement reform will be introduced
by 21 April 2014. The prescribed form of that statement is not yet
available, but the government has indicated that it will only
require a head contractor to confirm that payments have been made
to subcontractors it has directly engaged. The statement will not,
for example, require the head contractor to confirm that
subcontractors further down the contracting chain have been paid,
which has been flagged by some as a potential issue.
Interestingly, the government has made very little mention of
the retention money trust scheme, which it put forward in its
Consultation Paper in October 2013. Over previous months, the
government has been consulting industry participants for its views
on this trust scheme, which is proposed to be administered by the
Office of the Small Business Commissioner. It appears from
government's announcement that this reform is still some way
The government has published a series of fact sheets on the
ProcurePoint website offering basic guidance to industry on the
operation of the first three reforms. It has also foreshadowed the
publication of a compliance and enforcement policy, which will
include further guidance material on the reforms.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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