Victoria’s Security of Payment reforms are no longer a proposal. The legislation is now in place and is a major reset for the industry. For contractors, head contractors and principals, this is a business systems issue as much as a legal one.
The legislation behind the reforms has already passed Parliament and received Royal Assent, with the core Security of Payment changes to commence on proclamation at the latest, by 1 September 2026. That gives the industry a window to prepare, but not a long one. This matters because the reforms go well beyond legal housekeeping. They will change how payment claims are made, how quickly they are assessed, how payment schedules are prepared, and how performance security is handled across Victorian projects.
Existing contracts are also part of the story, as the amended regime is intended to apply to contracts entered into before or after commencement, subject to certain carve-outs. The biggest commercial shift is that more claims will move through the Security of Payment process. Victoria is scrapping its excluded amounts regime, removing the old limits that kept many variation, latent condition and time-related claims outside the Act. In practical terms, that means more entitlement disputes are likely to fall within the monthly payment cycle rather than being pushed into longer-form dispute processes. The claiming process is also becoming more structured and more regular.
The new framework allows payment claims from the last day of the named month (unless the contract has an early claim date) in which work was carried out, moving the regime toward a clearer monthly claiming rhythm. There is also a six-month long-stop for serving a claim after practical completion or after the relevant goods and services were supplied. Claims for release of performance security arise when the contractual entitlement to release occurs and may be pursued through the new statutory mechanism, subject to applicable contractual and general limitation periods. One of the most important changes is procedural discipline. If reasons for withholding payment are not properly set out in the payment schedule, they may not be available later in adjudication. That significantly raises the quality threshold for schedules. Teams will need complete information, a fast internal review, and much tighter coordination between the project, commercial, and finance functions. For subcontractors, these reforms are a real step forward:
- They should make it easier to claim what you are owed
- Strengthen cash flow
- Limit the head contractor’s ability to shift its reasons for non-payment later, and
- Give better protection around retention and other security
The trade-off is that subcontractors will need to be sharper on paperwork and timing, because the new regime gives better rights to those who run a disciplined claim process. Depending on the contract, Liquidated damages can be set off against the value of construction work. This means that the timely issue of extension of time notices is crucial. The reforms also reshape the rules around performance security.
The Act introduces a statutory process for claiming release of security, requires timely performance of security schedules, and restricts recourse by requiring written notice and at least 5 business days' notice before a party may call on security, unless the contract already requires a longer period. For many businesses, that means bank guarantees and bonds can no longer be treated as a background administrative issue. The usual December slowdown is now built into the legislation as well. Days between 22 December and 10 January are excluded from the definition of a business day, effectively pausing statutory business-day timeframes during that period. There are also specific seasonal rules affecting when certain December claims may be served.
The practical takeaway is simple: the businesses that handle this best will not just have strong contracts. They will have strong systems. Clean records, disciplined claim assessment, clear approval workflows and visibility across project and finance teams will matter more than ever once the new regime starts. That is why this is not just a legal reform story. It is an operational readiness story.
Now is the time to review templates, payment workflows, variation controls, schedule preparation and security processes. When these reforms commence, the gap between well-run operators and reactive ones will become much more visible.
Please reach out to your consultant if you would like a review of your processes.