If you’re a business owner operating in the building and construction industry in NSW, it’s vital to be aware of the laws governing payments to tradies and other subcontractors.

Changes to the NSW Security of Payments Act (SOP Act) passed in 2019 dramatically change the way in which you must respond to payment requests.

Here’s what you need to know about being prepared for these changes.

What is the NSW Security of Payments Act?

The Security of Payments Act NSW legislates building and construction industry payments within the state.

It is designed to ensure that any person who undertakes construction work or to supply related goods and services under a construction contract receives, and can recover, progress payments for their work or supply of goods and services.

The SOP Act aims to ensure that contractors and subcontractors are paid promptly, that money is moved down the contracting chain faster, and that disputes over payments can be resolved quickly and fairly.

When might the SOP affect you?

The Security of Payments Act could affect you in the following types of situations in the building and construction industry:

  • A subcontractor makes a claim and you can’t pay in full as you are yet to be paid by your client.
  • You’re a contractor always chasing payments from the builder and it’s having a serious impact on your business.
  • You receive a fraudulent claim from a subcontractor for work that you dispute was carried out.

How can builders prepare for the changes?

If you’re a builder who uses subcontractors, the latest changes to the Security of Payments act NSW make it even more important to be on top of the amounts owing and their due dates.

If you fall behind on payments to subcontractors and do not enter into a payment agreement, you could be legally forced to make payment in full. Additionally, company directors can be made liable under court order for these payments.

If you receive an invoice from a subcontractor that you contest, don’t ignore it. Without appropriate action, the subcontractor can make a claim and force payment, even if you believe the invoice to be fraudulent.

Since you will only have a limited amount of time to deal with the claim, have a system in place to ensure that any payment claim is promptly brought to the attention of whoever is in a position to deal with it.

How can tradies prepare for the changes?

For subcontractors, payments from builders can be slow or even non-existent at times. This can place undue financial pressure on your own business and, in turn, your own personal finances.

The Security of Payments Act NSW provides you with a method to pursue payment when all other avenues have failed.

In order to be able to make a successful claim, ensure that invoices are appropriately worded and that you follow the steps required by the SOP Act.

Before taking any action, bear in mind that it may adversely affect the business relationship. By making a claim for payment under the Act, the relationship may sour and the resulting loss of business or negative reputation could impact your own business.

Protect your business with the right professional help

Having a system in place that strongly defends your rights under the Security of Payments Act is crucial for protecting you and your business.

The SOP Act NSW is a highly complex area. Consider hiring a specialist lawyer if you want to ensure that you achieve the right outcome for your business.

If you have any questions or concerns about the Security of Payments Act, please contact us here.