As part of the raft of changes brought in by the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020 passed on 15 July this year there are some that are expected to commence as early as 1 October this year.
These changes should be front of mind given the changes will affect current practice in less than a month. This article points out some of the more important changes that might affect your practices very quickly. This article does not set out all the changes: –
The subcontracting exception schedule 1A Section 8
This section was inserted in 2013 and allowed for an unlicensed person to enter into a contract to carry out building work so long as the works were not residential or domestic building work and the work was to be carried out by an appropriately licensed contractor. This provision has been deleted.
Within debate in the Parliament, the provision was disparagingly referred to as a loophole. It might more accurately be referred to as a legislative exception. These changes appeared within the most recent amendments to the Bill on the recommendation of the Committee reviewing the initial bill. This was surprising bearing in mind it had little relationship to other subjects dealt with within the Bill. It is currently unclear as to whether the provision deleting this provision will, by proclamation, commence 1 October or later, as some further consultation with the industry is said to be likely. These provisions have on occasion been used within a group of companies where small amounts of "building work" was carried out and to ensure licencing compliance. If that were the case for you, there will be a need to review compliance issues, so you don't fall foul of hefty penalties for unlicensed contracting and the possibility of being unable to recover payments under your contract.
Supporting Statements to accompany payment claims
If you make a payment claim and you have engaged subcontractors or sub-consultants there will be a need to provide with any payment claim a supporting statement. That statement consists of a declaration that all subcontractors have been paid all amounts owed to them at the date of the payment claim or stating who hasn't been paid giving details of the full amount that the subcontractor is still unpaid, details of the unpaid payment claim, the date the subcontractor carried out the construction work, and any reasons the amount was not paid in full.
The validity of the payment claim is not affected if a supporting statement is not provided but it would make you open to fines by way of maximum to a company of over $65,000.00.
Before 1 October you will need to have your formats for payment claims amended to accommodate this change or risk very substantial fines.
Payment for scheduled amounts
You need to ensure that your contracts provide for the due date for payment and when the payment schedule is due to be delivered. If there is no provision in the contract concerning these issues the Act prescribes by default that a payment schedule is due 15 business days after the claim is given. Somewhat confusingly the Act also provides in a default circumstance that the due date for payment will be 10 business days after the claim has been given.
To add to these problems there is a new offence should payment not be made of the stated amount in a payment schedule by the due date. For a company, the fine is a maximum of approximately $65,000.00.
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.