In 2012 the NSW Government commissioned an Independent Inquiry into Construction Industry Insolvency to assess the cause and extent of insolvency in the industry and to recommend measures to better protect subcontractors. The Building and Construction Industry Security of Payment Amendment Bill 2013 (Bill) (introduced on 24 October 2013) proposes amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) which focus on the protection of subcontractors.
What are the proposed changes?
The Bill introduces 3 major changes to the Act:
- Act applies to all payment claims for construction work or related goods and services: Except for certain residential building contracts, payment claims will no longer need to include a statement that they are made under the Act to attract the operation of the Act. Claims management processes will therefore need to be even more rigorous given the likely increase in the number of claims to be dealt with in accordance with the Act.
- Prompt payment: A maximum time for payment will be prescribed, so that progress payments from a principal to a head contractor will be due and payable 15 business days after the payment claim is made, and from a head contractor to a subcontractor 30 business days after the payment claim is made. Longer payment terms will have no effect. Certain residential building contracts will be excluded from these maximum payment periods.
- Supporting statements: A head contractor will need to submit a “supporting statement” with each payment claim, declaring that it has paid its subcontractors all amounts that have become due and payable in relation to the construction work concerned. A failure to do so will be an offence with a maximum penalty of $22,000. Knowingly providing a false or misleading supporting statement will be a separate offence with a maximum penalty of $22,000, 3 months imprisonment or both. A form of the statement will be prescribed in the regulations.
Once enacted, contract administrators, principals and head contractors will need to ensure compliance with the new provisions, paying special attention to the new prompt payment requirements.
Author(s): Ronit Olovitz
Partner | Melbourne
T +61 3 9321 9919
Partner | Brisbane
T: +61 7 3135 0614
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