1 Legal framework

1.1 Which legislative and regulatory provisions govern construction projects in your jurisdiction?

Australia consists of six states and two major territories which together make up the federation known as the Commonwealth of Australia. Construction projects within each jurisdiction are governed by Commonwealth, state and territory legislative and regulatory regimes.

Some Commonwealth laws apply nationally, such as the national employment laws and the National Construction Code (containing the minimum standards for the design and construction of a building in Australia).

Otherwise, each jurisdiction has its own legislative and regulatory regimes that govern matters such as licensing, contracting, statutory implied warranties and security of payment.

1.2 What other legislative and regulatory provisions have relevance for construction projects in your jurisdiction?

Typically, construction contracts impose a broad obligation to comply with all legislative requirements. Frequently, this will extend beyond legislative compliance to compliance with non-legislative documents such as Australian Standards (these contain performance requirements and technical standards for various aspects of construction work).

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

Regulators exist at a Commonwealth, state and territory level. For example, at the Commonwealth level, the Australian Building and Construction Commission (ABCC) regulates workplace relations law in the industry. The ABCC has broad investigative and enforcement powers.

The powers of the various regulators range according to the specific powers provided by the legislative framework applying to each regulator. By way of example of how these powers may differ across jurisdictions, the Queensland Building and Construction Commission is responsible for implementing the licensing regime in Queensland and has a broader licensing regime than that in New South Wales (regulated by Fair Trading NSW).

1.4 What is the general approach in regulating the construction sector?

While the construction sector in Australia is generally heavily regulated, there are different regulatory approaches across the various jurisdictions. Legislative uniformity exists for some regulatory issues (eg, work health and safety laws are largely uniform across jurisdictions); while there is a lack of legislative harmony across the individual jurisdictions for other issues (eg, security of payment), often resulting in compliance difficulties for entities operating across multiple jurisdictions.

2 Procurement methods

2.1 What procurement methods are most commonly used in your jurisdiction? Do these vary depending on whether international parties are involved?

Common procurement methods include:

  • design and construct;
  • construct only; and
  • construction management.

Public-private partnerships are often used for large government infrastructure projects.

Collaborative forms of procurement such as alliance contracting and early contractor involvement are at times used for complex projects, and there is a push towards a greater emphasis on this from contractors.

Engineering, procurement and construction and engineering, procurement, construction and management delivery methods are frequently used for large-scale engineering projects.

Procurement methods do not tend to vary if international parties are involved.

2.2 What are the advantages and disadvantages of these different methods?

Traditional forms of contract such as design and construct offer relatively clear risk profiles. For example, a design and construct contract places design risk with the contractor benefiting the employer, while at the same time the employer has less control over design elements.

Collaborative forms of contract aim to be less adversarial, with risk shared and less likelihood of project delays.

Public-private partnerships offer private sector involvement (and access to private funding); however, employers may face higher overall costs with fewer contractors to choose from in this space.

Construction-only procurement places responsibility for the design and its suitability on the employer, but that lower level of risk for contractors may lead to lower bid prices and a wider range of suitable contractors.

2.3 What other factors may influence the choice of procurement method?

Other influencing factors may include the funding arrangements requiring a specific method, as well as how developed the design is at the time bids are sought.

3 Project structures

3.1 How are construction projects typically structured in your jurisdiction? Does this vary depending on whether international parties are involved?

The corporate structure chosen by a party for a construction project will depend on the individual construction project.

Contractors often operate through special purpose vehicles created solely for each project which are then wound up at the project's conclusion. It is also common for contractors to form joint ventures to bid as one entity for specific construction projects.

An international party will typically establish a local Australian company or operate through an unincorporated joint venture to do business in Australia.

3.2 What are the advantages and disadvantages of these different structures?

Where a special purpose vehicle is created for an individual project, the financial risks are effectively ring-fenced to that project.

A joint venture between contractors allows for the sharing of risk and collective expertise. Conversely, this structure may provide employers with less choice in the contractor to be chosen, as the pool of available contractors with suitable experience may be reduced.

3.3 What other factors may influence the choice of project structure?

Other factors which may sway the choice of project structure include whether international parties are involved and the value of the project. For example, a joint venture is more likely on high-value projects and/or technically complex projects (eg, between local and international contractors so that both local and international expertise can be drawn upon).

4 Financing

4.1 How are construction projects typically financed in your jurisdiction? Does this vary depending on whether international parties are involved?

Financing is typically sourced from a combination of equity and debt financing (finance received from financial institutions or other finance providers such as superannuation funds) or subordinated debt.

Government funding may be provided for government-led projects.

Principals may also seek to raise investment for projects via the Australian Stock Exchange, from bonds or other securities.

If an international party is involved, the party may establish a local business in Australia and then inject foreign direct investment into the local business.

Foreign investment approval may be required from the Foreign Investment Review Board (for investments that are subject to the Foreign Acquisitions and Takeovers Act 1975 (Cth)).

4.2 What are the advantages and disadvantages of these different structures?

Government funding is generally lower risk and lower cost than privately sourced funding.

Debt financing generally has a lower risk of default, given that project assets are secured. However, if sponsors are required to provide guarantees, these sponsors potentially risk their own assets.

Generally, short-term financing options (eg, mezzanine financing) have higher costs which reflect the higher risk profile.

4.3 What other factors may influence the choice of financing structure?

Factors that may influence the choice of financing structure include:

  • the value, nature and complexity of the construction project;
  • the type of corporate vehicle chosen for the project; and/or
  • the value of project assets which may be used as security.

4.4 What types of security and other protections are available to lenders to safeguard their position?

There are a range of protections available to lenders to safeguard their position, including:

  • mortgages, charges and liens over real property;
  • registration of security over personal property pursuant to the Personal Property Security Act 2009 (Cth) (PPSA);
  • unconditional undertakings or bank guarantee; and
  • director or parent company guarantees.

4.5 What law typically governs project finance agreements in your jurisdiction? Do any specific requirements apply in this regard?

Project finance agreements in Australia are typically governed by the laws of an Australian jurisdiction (generally where the project or the borrower is based). Australia has a general regulatory framework governing project sponsors and investors with key regulators including the Australian Prudential Regulation Authority. Legislation that may impact on project finance include the PPSA and the Corporations Act 2001 (Cth), both of which have requirements relating to the enforcement of security.

5 Bribery and corruption

5.1 What measures are in place to combat bribery and corruption in your jurisdiction?

The criminal laws of the Commonwealth, states and territories contain bribery offences.

For example, the Criminal Code Act 1994 (Cth) provides for offences of bribery of Commonwealth public officials. The criminal legislation in each state and territory makes bribery (in public and private settings) an offence.

The enforcement of these laws occurs at a Commonwealth, state and territory level – for example, the Australian Federal Police has the primary law enforcement responsibility for investigating fraud and corruption against the Commonwealth; while at a state level, the Crime and Corruption Commission in Queensland investigates allegations of corruption in Queensland's public sector.

6 Standard form contracts

6.1 Which standard form contracts are typically used for construction projects in your jurisdiction? Does this vary depending on whether international parties are involved?

Standards Australia publishes standard form contracts which are widely used in Australia. These include:

  • AS 2124-1992 – General Conditions of Contract;
  • AS 4000-1997 – General Conditions of Contract for Construct Only;
  • AS 4902-2000 – General Conditions of Contract for Design and Construct; and
  • AS 4903-2000 – Subcontract Conditions for Design and Construct.

Additionally, industry associations (eg, the Royal Australian Institute of Architects and Master Builders Australia with the ABIC MW form and the Property Council of Australia with PC-1) publish their own standard form contracts which are geared towards the needs of their members and principals which procure significant amounts of work will usually have their own standard sets of amendments for use with their preferred standard form contracts (eg, NSW government bodies frequently use GC21, although there have been recent moves towards using an NEC4 based form of contract from Sydney Water).

On very high-dollar engineering or process engineering projects, International Federation of Consulting Engineers (FIDIC) forms (eg, the 1999 Silver Book) are sometimes used; but generally speaking, the FIDIC Rainbow Suite is yet to find widespread acceptance in Australia.

6.2 What are the advantages and disadvantages of using the different standard forms?

An advantage of using a standard form is the widespread familiarity of these forms, which can simplify the tender process and encourage cost competitiveness.

Contractors may prefer to use standard forms published by industry associations (eg, Master Builders Association), as these typically allocate risk favourably to them; while an employer may prefer standard form contracts published by Standards Australia, which have a more employer-friendly risk allocation. As a general observation, despite an ongoing push towards more balanced risk allocations, construction contracts in Australia typically are more employer friendly.

6.3 What other factors may influence the decision to use standard form contracts and the choice of standard form?

Influencing factors include:

  • the nature of the construction project;
  • the bargaining power of each party; and
  • the ability of the party to influence the choice of contract – although in the case of developers or government clients, they will typically have their own preferred form of contract (which is often an amended standard form).

6.4 Where standard form contracts are used, do parties typically modify their provisions?

Standard form contracts are commonly amended to adjust the risk allocation (usually relating to time and cost) between parties. Provisions that are typically modified include security, extension of time, variations and indemnities.

7 Contractual issues

7.1 Is a choice of foreign law or jurisdiction valid and enforceable? In the case of a choice of foreign law of jurisdiction, will any provisions of local law have mandatory application?

The choice of foreign law or jurisdiction as the governing law of a contract is valid and enforceable in Australia.

Notwithstanding a choice of foreign law, local legislation will continue to apply over and above a foreign law in certain circumstances. For example, security of payment legislation of the state or territory where work is performed will apply regardless of any choice of law nominated in the contract.

7.2 What formal, substantive and procedural requirements typically apply to construction contracts in your jurisdiction? Are there any mandatory terms? What terms are typically included? Are any terms prohibited?

It is common for construction contracts to include a formal instrument of agreement, general conditions and relevant annexures. Typical terms include:

  • warranties;
  • security;
  • latent conditions;
  • defects;
  • variations;
  • extensions of time;
  • payment;
  • indemnities; and
  • dispute resolution processes.

Terms that impose a penalty (although liquidated damages for delay or failure to meet performance criteria are standard) or contract out of mandatory legislation may be void.

Residential construction is heavily regulated by state and territory legislation which stipulates the minimum requirements that residential contracts must contain.

7.3 How is risk typically allocated between the parties? What steps can the parties take to mitigate these risks?

Although there are moves towards a more collaborative contracting environment in Australia, the current risk allocation environment typically favours parties higher up the contractual chain, which generally seek to pass as much risk as possible downwards.

If a contract contains an unfavourable risk allocation, efficient project management may be critical to minimise liability. The current risk allocation environment, combined with strict contractual time bars frequently being applied to claims, encourages a claims-oriented approach by those lower down the contractual chain.

7.4 How can liability be excluded or restricted in your jurisdiction? Are parties able to cap their liability?

Parties may agree to restrict or exclude liability.

Certain liabilities may not be excluded by law. For example, in some states and territories, parties are unable to contract out of proportionate liability legislation.

Parties generally agree to cap liability, but such caps are usually subject to agreed carve-outs (eg, in relation to claims for injuries to third parties or for breaches of IP rights). Often parties also agreed to exclude liability for consequential loss.

7.5 In the event of delay to the project, what consequences will this typically have for the parties?

The terms of the contract in relation to extension of time and liquidated damages for delay will determine the consequences for delay. Depending on the contractual provisions, delay may also give rise to a right to termination. Typically, where a contractor does not complete by the time for completion (as extended in accordance with the contract), it will be liable to pay liquidated damages.

7.6 Is the concept of force majeure recognised in your jurisdiction? If so, what are the typical implications for the parties?

The concept of force majeure is recognised in Australia, but not by legislation.

The force majeure regime which applies (if any) will be solely as provided for in the contract. For this reason, it is critical for force majeure clauses to be carefully drafted (particularly in light of the COVID-19 pandemic).

7.7 What scope do the parties typically have to make material variations to the works?

Contracts typically contain a variation provision allowing the employer (or contract administrator) to direct variations.

Contracts do not ordinarily permit contractors to unilaterally vary the scope of works, but often provide for a process to request a variation direction at the discretion of the employer.

7.8 Are there any particular requirements for completion or taking-over in your jurisdiction?

The requirements for practical completion (or substantial completion) are usually specified in the contract. There are no mandatory legislative provisions (although it may be necessary to obtain certification that a project is complete before it can be occupied and used).

Following completion, a defects liability period will ordinarily commence (usually 12 months or longer for complex projects).

7.9 What requirements and restrictions typically apply to the termination of the construction contract in your jurisdiction?

The requirements for the termination of a construction contract are specified in the contract. The contract will usually include provisions relating to termination for breach, as well as a termination for convenience clause (which will typically provide for a process of payment balancing as at the date of termination).

Alternatively, parties may terminate based on the common law doctrine of repudiation where a fundamental breach has occurred.

7.10 How are delay or liquidated provisions dealt with in your jurisdictions?

The ability for an employer to impose liquidated damages depends on the contract. Liquidated damages must be a genuine pre-estimate of loss and not a penalty. If they are held to be a penalty, the clause will be unenforceable.

8 Subcontractors and suppliers

8.1 Are there any particular issues which arise when dealing with subcontracts and/or subcontractors which are different from the issues discussed elsewhere?

In some states and territories, payments owing to subcontractors are protected by legislation. For example, pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW), a subcontractor has direct rights to payments owed from an employer to a head contractor whereby moneys may be required to be retained pending the outcome of an adjudication application.

8.2 Are there nominated subcontractors in your jurisdiction?

A head contract may specify that nominated subcontractors are to be engaged for a specific scope of works.

9 Payment

9.1 Are there any statutory or other requirements which govern how parties are paid?

Each state and territory has security of payment legislation that provides for a statutory regime for progress payments and adjudication of payment disputes. The applicable legislative regime is mandatory and cannot be contracted out of.

The security of payment regimes are not harmonised across jurisdictions, although the regimes generally follow what is known as either the ‘west coast' model (currently comprising the Northern Territory and Western Australia) or the ‘east coast' model (comprising all other states and territories).

In Western Australia, the operative provisions of the new Building and Construction Industry (Security of Payment) Act 2021 (WA) currently await commencement and will significantly change the regime in that jurisdiction.

9.2 Are ‘pay when paid' clauses valid? In what circumstances?

The security of payment legislation in each jurisdiction provides that ‘pay when paid' clauses are of no effect.

9.3 How are retentions typically dealt with?

Retentions are typically dealt with in accordance with the terms of the contract.

Ordinarily, security is partially released upon practical completion, with the balance of the retention released upon completion of the defects liability period.

In some jurisdictions, legislation dictates the requirements for the holding and release of retentions. For example, in Queensland, the Queensland Building and Construction Commission Act 1991 (Qld) stipulates the maximum amounts for retention and the timing for the release of retention.

10 Health and safety

10.1 What key health and safety requirements apply to construction projects in your jurisdiction?

Health and safety legislative frameworks are largely harmonised, with most states and territories adopting the Commonwealth model health and safety legislation (Work Health and Safety Act 2011 (Cth), regulations and codes of practice) (‘Model Legislation').

Currently, Victoria remains the only state yet to adopt the Model Legislation. Western Australia recently adopted the Model Legislation in the Work Health and Safety Act 2020 (WA); however, the operative provisions of this legislation are yet to commence.

The Model Legislation imposes a duty of care with respect to health and safety on a person conducting a business or undertaking (PCBU), officers of PCBUs, workers and other persons at the workplace.

PCBUs must also manage risks associated with construction work and high-risk construction work (eg, safe work method statements are required for high-risk construction work).

Construction projects over a prescribed value (in most jurisdictions, A$250,000) must have a principal contractor that has additional duties such as the obligation to prepare and maintain work health and safety management plans. The default provision is that the PCBU is the principal contractor.

In Victoria, although the legislation uses different terminology, similar requirements exist.

10.2 What reporting requirements apply with regard to construction site accidents in your jurisdiction?

PCBUs have a duty to immediately notify the regulator of a ‘notifiable incident' (ie, the death of a person, a serious injury or illness of a person or a dangerous incident). The PCBU must also ensure, so far as is reasonably practicable, that the site where the incident occurred is not disturbed until an inspector arrives at the site or any earlier time that an inspector directs.

Victoria has similar notification of incidents and non-disturbance requirements.

10.3 What are the potential consequences of breach of these requirements – both for the contractor itself and for directors, managers and employees?

The contractor, directors, managers and employees have potential liability under the Model Legislation. Pursuant to the Model Legislation, individuals (other than as a PCBU or as an officer), individuals (as a PCBU of an officer of a PCBU) or corporations may be liable for breach of a legislated health and safety duty. Similarly, duties are imposed on individuals and corporations under the Victorian legislation.

Whether an employer is liable for an employee's conduct pursuant to the common law principles of vicarious liability will depend upon the individual circumstances of each case, including whether such conduct is within the scope of the employee's authority.

Inspectors are authorised to issue enforcement notices and penalties including:

  • improvement notices (ie, notices to remedy a contravention);
  • prohibition notices (ie, stop work notices);
  • non-disturbance notices (ie, notices to preserve an incident site); and
  • infringement notices (ie, on-the-spot fines).

In some jurisdictions (these include Victoria, Queensland, the Northern Territory, the Australian Capital Territory and Western Australia, once the operative provisions of the new legislation in Western Australia commence), industrial manslaughter is an offence carrying a potential jail term for up to 25 years in some jurisdictions, as well as significant monetary fines.

The Model Legislation otherwise categorises offences in three categories which are broadly:

  • category 1 (reckless conduct);
  • category 2 (failure to comply with a health and safety duty which exposes an individual to a risk of death or serious injury or illness); and
  • category 3 (failure to comply with a health and safety duty).

The penalties for breach range depending on the jurisdiction (including Victoria, although offences are classified by different terminology), but may include significant monetary fines as well as potential imprisonment for more serious offences.

10.4 What best practices in relation to health and safety should construction contractors consider adopting in your jurisdiction?

Contractors must manage the health and safety duties that are imposed by the Model Legislation. These risks must be managed to eliminate risks to health and safety as far as reasonably practicable, meaning what could reasonably be done at a particular time to ensure that health and safety measures were in place. In determining what is reasonably practicable, contractors must weigh up all matters (the specific matters that are required to be taken into account are stipulated by the Model Legislation). Similar requirements exist in Victoria.

10.5 Which bodies are responsible for enforcement of health and safety obligations?

The individual government regulators in each jurisdiction are responsible for the enforcement of health and safety obligations.

10.6 What is the general approach in regulating the construction sector from a health and safety perspective?

Generally, the party in control of the work site will take responsibility as the principal contractor for the health and safety obligations for the site. Subcontractors and any others that enter or work on a construction site must also be aware of their individual obligations and comply with these.

11 Environmental and sustainable development issues

11.1 What environmental authorisations are required for construction projects in your jurisdiction? Do these vary depending on the type of project or the location of the site?

Approvals may be required for a construction project from the Commonwealth, state, territory or local governments.

Commonwealth approvals may be required if a project impacts on matters of national significance (eg, pursuant to the Environment Protection and Biodiversity Conservation Act 1999 (Cth)) (‘EPBC Act').

Otherwise, the location of the site will determine the specific approvals required, as the matrix of environmental laws is specific to each state and territory, covering a range of issues such as pollution, water management, noise and waste.

11.2 What is the process for obtaining environmental authorisations?

Environmental authorisations are ordinarily obtained as part of the planning approval process for a construction project, which is typically the employer's responsibility (unless the parties agree that the contractor will assist).

An environmental impact assessment may be required, depending upon the nature of the project (usually those with potential environmental effects) and the state or territory in which the construction site is located.

11.3 What environmental requirements must the contractor observe while the site is operational?

Environmental requirements are usually specified in the contract.

For example, the contract will typically require a contractor to comply with all ‘legislative requirements' (or similar), which is usually defined broadly so the obligations extend to compliance with environmental laws and approvals.

It is also common for contracts to include a requirement that the contractor comply with the employer's environmental management system or environmental plan, which may impose more stringent obligations, including requiring contractors to submit environmental plans/work method statements relevant to environmental issues.

11.4 What are the potential consequences of breach of these requirements – both for the contractor and for directors, managers and employees?

Environmental offences may result in civil or criminal liability. A range of compliance measures and enforcement options may be imposed by state and territory regulators, including:

  • clean-up notices;
  • stop work notices;
  • directions notices to remedy a contravention;
  • fines; and
  • imprisonment.

State and territory legislation specifies the relevant criteria for determining the penalty to be imposed, which differs across jurisdictions. For example, the degree of environmental harm caused is a consideration in Queensland; but in Victoria, more weight is given to intention in classifying the harm.

Liability for environmental offences may extend beyond the contractor company. State and territory legislation imposes liability on directors and managers for certain environmental offences committed by a corporation unless a defence of due diligence is available (eg, see Section 493 of the Environmental Protection Act 1994 (Qld)).

Employees may also be liable for environmental offences; however, if an employee commits an environmental offence, employers may be liable for the employee's conduct pursuant to either common law principles of vicarious liability or the applicable legislation, provided that such conduct is within the scope of the employee's authority (eg, see Section 353 of the Environment Protection Act 2017 (Vic)).

11.5 What environmental requirements apply to new buildings?

Voluntary rating systems such as the National Australian Built Environment Rating System and Green Star are commonly used to measure the environmental performance of buildings.

While these are voluntary systems, the Commonwealth's Commercial Building Disclosure Programme established pursuant to the Building Energy Efficiency Disclosure Act 2010 (Cth) requires energy-efficient information to be provided when certain commercial office spaces are offered for sale or lease.

11.6 Which bodies are responsible for enforcement of environmental obligations?

At the Commonwealth level, the Department of Agriculture, Water and the Environment regulates the environmental obligations in the EPBC Act.

Each state and territory has a regulatory authority that enforces the laws of that jurisdiction.

11.7 What is the regulators' general approach in regulating the construction sector from an environmental perspective?

Regulators seeking compliance with environmental requirements will generally take a proportionate approach to the offending conduct. However, where necessary, individuals or companies will be prosecuted where it is in the public interest to do so.

11.8 What is the impact of Net Zero in your jurisdiction?

No answer submitted for this question.

12 Insurance

12.1 What types of insurance arrangements - whether compulsory or optional - are typically put in place for construction projects in your jurisdiction?

The construction contract will typically stipulate insurance requirements. Common insurances required include:

  • works insurance;
  • professional indemnity insurance; and
  • public and product liability insurance.

Compulsory statutory insurance – such as a requirement for contractors to hold workers' compensation insurance and third-party compulsory motor vehicle insurance – is also typically required by construction contracts.

In New South Wales, the Design and Building Practitioners Act 2020 (NSW) introduced mandatory insurance requirements for engineers, design and building practitioners requiring (from 1 July 2023) these practitioners to be ‘adequately insured' with respect to class 2 buildings (these include apartments, townhouses and duplexes).

Residential projects over a certain value require home warranty insurance in most states and territories.

12.2 If local insurance is required, can local insurers assign reinsurance contracts in your jurisdiction?

Local insurers may assign reinsurance contracts provided that the reinsurance contract does not prohibit an assignment of rights.

While contracts of reinsurance are not governed by the Insurance Contracts Act 1984 (Cth), reinsurance contracts are not without regulation in Australia. For example, the Australian Prudential Regulation Authority sets various prudential standards in relation to reinsurance arrangements.

12.3 Is it possible to obtain insurance for fitness for purpose design obligations?

Professional indemnity insurance typically covers liability of professionals (including design consultants) for claims arising from a breach of a professional duty to act with reasonable care and skill. This insurance coverage will not ordinarily extend to cover fitness for purpose design obligations. In theory, additional coverage to cover an express fitness for purpose obligation may be purchased at additional cost; but in reality, it is practically not possible to find insurers willing to provide such cover, particularly on economically attractive terms.

12.4 What other forms of insurance feature in construction projects in your jurisdiction?

Insurance requirements are generally dependent on the scope of works. For example, marine insurance may be required to insure against damage to marine works if these works are part of the contract scope.

13 Employment

13.1 What legislation must employers and contractors be aware of when hiring labour?

The primary legislation governing employment arrangements is the Fair Work Act 2009 (Cth), which provides for various minimum entitlements and conditions for employees including the National Employment Standards (this legislation does not apply to some state government employees).

In some states and territories (currently Queensland, Victoria and South Australia), labour hire legislation has been enacted to govern labour hire arrangements whereby labour hire service providers must hold a licence to operate a labour hire business. Employers and contractors should be aware of these obligations, as they may face significant penalties if they engage an unlicensed labour hire service provider.

Employers and contractors should also be aware of any requirements in relation to the hiring of foreign workers for construction projects. For example, the Code for the Tendering and Performance of Building Work 2016, issued under the Building and Construction Industry (Improving Productivity) Act 2016, sets out a range of requirements for Commonwealth-funded building work (which may extend beyond Commonwealth-funded building work in some cases), including requirements in relation to the employment of foreign workers.

14 Tax

14.1 What issues must be considered from a taxation perspective in relation to construction projects in your jurisdiction?

Various taxes may be imposed on parties by the Commonwealth, state and territory governments. Examples of taxation liabilities that may be incurred in connection with a construction project include the following:

  • corporate income tax – imposed on business profits;
  • stamp duty – a state-based tax calculated on the value of property sold;
  • payroll tax – payable by employers to the state based on the wages paid to employees in that jurisdiction;
  • capital gains tax – payable on profits from selling assets, including real property; and
  • goods and services tax – a 10% tax payable on the supply of certain goods and services.

14.2 Are any exemptions or incentives available to encourage construction in your jurisdiction?

Tax incentives may be available for certain construction projects, such as those that encourage research and development, green projects and regeneration projects.

14.3 What strategies might parties consider to mitigate their tax liabilities in the construction context?

Examples of strategies that parties may implement to minimise taxation liabilities include:

  • deferring profits on projects or carefully timing deductions to reduce income tax; and
  • strategically structuring entities (eg, using partnerships and trusts where appropriate) so that taxation liabilities can be managed as a consolidated group.

15 Technology

15.1 How is Building Information Management (BIM) dealt with in your jurisdiction? Does the government mandate any particular BIM standards or other requirements?

BIM is being increasingly used for both private and government construction projects in Australia.

The Commonwealth government does not mandate any standards or other requirements for BIM.

State and territory governments are at different stages of the uptake of BIM.

Queensland is transitioning to mandatory BIM for all government infrastructure projects. In Queensland, since 1 July 2019, government construction projects with a value of A$50 million or more are required to use BIM from the early planning phase; and all major government infrastructure projects will be transitioned to implement BIM by 2021.

Although other state and territory governments have not mandated the use of BIM for all government construction projects, BIM has been adopted on many major infrastructure projects throughout Australia.

While there are no mandatory standards or other requirements, Queensland, New South Wales and Victoria have published guidelines for the use of BIM in these jurisdictions (eg, the Digital Enablement for Queensland Infrastructure – Principles for BIM Implementation (November 2018) (Queensland)).

15.2 Are smart contracts used in your jurisdiction? Are there any special restrictions or regulations?

No answer submitted for this question.

15.3 What developments in digital technology do you see having a major impact on the construction industry?

No answer submitted for this question.

16 Disputes

16.1 In which forums are construction disputes typically heard in your jurisdiction?

The forum for dispute resolution in Australia will depend on the process stipulated in the construction contract.

Dispute resolution clauses in construction contracts typically provide for a tiered dispute resolution process. It is common for the process to be triggered by a notice of dispute containing details of the dispute followed by an informal negotiation process (eg, a conference). Depending on the clause, if a dispute is not resolved at an early stage, the dispute may proceed through one or more formal processes such as mediation, expert determination, arbitration or litigation.

16.2 What issues do such disputes typically involve?

It is common for construction disputes to involve issues that relate to quality, time and cost. These include a range of issues such as extension of time, delay and disruption, variations, defects and liquidated damages.

16.3 How are disputes typically resolved?

The process for dispute resolution is determined by the contract, which will frequently include some form of informal negotiation or mediation process before litigation or arbitration is commenced. In any event, the civil procedure rules of the courts will generally encourage early settlement of disputes and often require parties to participate in mediation prior to a dispute proceeding to trial.

16.4 Is the use of alternative dispute resolution common and/or encouraged by legislation or the courts?

No answer submitted for this question.

16.5 Is the use of dispute boards common in your jurisdiction?

The use of dispute boards is not standard practice, but it is becoming more common in Australia, particularly in relation to large infrastructure projects. Where a dispute board is used, the process is ordinarily included in the contract.

16.6 Have there been any recent cases of note?

Two recent cases of significance are as follows:

  • The High Court of Australia in Rinehart v Hancock Prospecting [2019] HCA 13 determined that the ‘proper' approach to the interpretation of arbitration agreements is through the application of "orthodox principles of interpretation, which require consideration of the context and purpose" of the arbitration agreement (at 18).
  • In Mann v Paterson Constructions Pty Ltd [2019] HCA 32 the High Court overturned the long-established position following the Privy Council decision in Lodder v Slowey which allowed a contractor to make a windfall where it sued on a quantum meruit basis following an employer's repudiatory breach. While this decision did not entirely remove the availability of quantum meruit claims in repudiation scenarios, it significantly narrows their scope (ie, in respect of works for which a contractual entitlement has not yet accrued) and the maximum sum of losses that will be claimable (ie, by reference to the contract price).

17 Trends and predictions

17.1 What has been the impact of the COVID-19 pandemic on construction in your jurisdiction?

No answer submitted for this question.

17.2 How would you describe the current construction landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The current construction landscape is varied because of the multiple jurisdictions and laws that govern the construction industry.

The impact of the global COVID-19 pandemic has also varied across each state and territory, because while supply chain issues have impacted the industry across Australia, localised lockdowns and restrictions on worker density have impacted construction projects in the affected localities.

Prior to the COVID-19 pandemic, there was significant levels of activity in the Australian construction industry, particularly on the east coast, due to significant investment in infrastructure. It is expected that these levels of activity will continue despite the impact of the pandemic because of ongoing infrastructure investment from the Commonwealth, state and territory governments, together with other initiatives such as the cutting of projects approval times. Targeted stimulus packages such as Queensland's 2020-21 COVID Works for Queensland programme will also assist the industry as Australia emerges from the COVID-19 pandemic.

Unsurprisingly, new construction contracts are seeing an increasing focus on heavily negotiated force majeure provisions, particularly given that force majeure is a contractual construct in Australia.

Legislative reform is occurring in some jurisdictions. For example, in Western Australia, legislative changes are underway with new security of payment legislation and model law health and safety legislation awaiting commencement of the operative provisions in recently passed legislation.

18 Tips and traps

18.1 What are your top tips for smooth completion of construction projects in your jurisdiction and what potential sticking points would you highlight?

Large government infrastructure projects in Australia have been a source of significant disputes in recent years. This is due to a combination of factors, such as the relatively limited number of contractors tendering for these large projects and an unwillingness to shift risk allocation. Collaborative practices in the tender process and beyond would be beneficial for the smooth completion of construction projects, to avoid the adversarial mindsets that have plagued the Australian construction industry in recent years.

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.