Since the release of the report by Bruce Collins QC into insolvencies in the New South Wales building industry on 28 January 2013, the New South Wales Government foreshadowed the introduction of changes to the Building and Construction Industry Security of Payment Act 1999 (Act), designed to assist contractors and subcontractors in the industry to receive quicker and more reliable payments from their clients.
Important Changes to the Act to Commence 21 April 2014
Changes to the Act passed by the Parliament last year commenced on 21 April 2014. The changes include:
1. the introduction of maximum payment terms for progress payments;
2. a requirement that payment claims made by head contractors include a supporting statement declaring that all subcontractors have been paid what is due and payable; and
3. the removal of the requirement that a payment claim must state that it is being made under the Act.
1. Prompt Payments – amendments to section 11 of the Act
Under the changes, head contractors are entitled to receive payment from the principal no later than 15 business days after the submissions of a payment claim. In turn, head contractors must make progress payments to subcontractors no later than 30 business days after receiving a payment claim.
A contract cannot include payment terms longer than the maximum payment period, as set in section 11.
2. Requirement for a supporting statement – amendments to section 13 of the Act
The new supporting statement requirement applies only to head contractors. If you are a head contractor and submitting a payment claim to a principal, you must provide a supporting statement with a declaration that the subcontractors you have engaged have been paid what is due and payable.
Penalties of up to $22,000 and/or three months imprisonment may be imposed where a head contractor has knowingly provided false or misleading information.
3. Removal of requirement for a payment claim to include a statement that is made under the Act
When you put in a payment claim you no longer need to include a statement that it is a claim made under the act. This requirement has been removed.
Section 13 (7)-(9) introduces a requirement that head contractors must not serve a payment claim on a principal unless the claim is accompanied by a supporting statement.
In the supporting statement, the head contractor must declare that subcontractors they have engaged have been paid all payments that have become due and payable in relation to the construction work concerned.
This requirement has been introduced to address the practice of falsely sworn statutory declarations about payments owed to subcontractors.
This will likely affect the way you do business and get paid. Your contracts and administrative processes will need to be adjusted accordingly. We are able to assist with this process or present a live seminar to you on the changes and what they will mean for your business.
If you would like our assistance or any more information please contact: