WA’s new security of payment law is here Achieving security of payment for plumbing contractors is one of our key policy objectives. The Building and Construction Industry (Security of Payment) Act 2021 became law in June. For us, this is a major achievement but not the end of the campaign.
Key points
• Reforms to security of payment were recommended in reports in 2017 and 2018.
• One of the recommendations was to introduce cascading statutory trusts to protect payments. The Government has broken its promise to do this.
• The new law is not retrospective.
• Contracts for single private dwellings up to $500,000 are not covered.
• Contractors and subcontractors have the right to claim and receive progress payments within legally specified periods.
• A trust scheme protects retention money.
• Anti-phoenixing provisions prevent people with a history of defaulting on payments from getting building licences under new business names.
No retrospectivity The new law is not retrospective. Existing contracts and new contracts created before the law took effect are not covered.
What the new law covers The new law applies to most types of building and construction contracts. The main exception to know about is contracts for single residential dwellings. The new law only applies to home building work if the principal is not an individual, the work is for multiple dwellings or for a residential development business of the principal, the contract value exceeds $500,000 and the contract is between a head contractor and a subcontractor, or between subcontractors.
Progress payments Contractors and subcontractors have a statutory entitlement to receive payment and make a claim for payment.
• A contractor or subcontractor is entitled to make a progress payment claim at the end of each month.
• The principal must pay within 20 business days, or a shorter period if the contract specifies one.
• Payments by head contractors to subcontractors, or between subcontractors, must be paid within 25 business days, or a shorter period if the contract specifies one.
• Payment claims for certain residential-related construction work must be paid by the date specified in the contract, or 10 business days if no date is specified.
If the party that receives a payment claim does not intend to pay the full amount, they must issue a payment schedule within 15 business days. The payment schedule must include the amount they will pay and their reasons for withholding full payment. If the payment schedule is not provided on time or the full amount is not paid, the party claiming payment has the option of using an adjudication process instead of going through the courts.
Background: Murray Review and Fiocco Report The new law brings in some of the reforms recommended in the 2017 Review of Security of Payment Laws: Building Trust and Harmony (Murray Review) and the 2018 Final Report to the Minister for Commerce: Security of Payment Reform in the WA Building and Construction Industry (Fiocco Report).
The WA Government’s broken promise The WA Government has not kept its February 2019 promise to introduce cascading statutory trusts, which the Fiocco report recommended. The purpose of cascading statutory trusts is to ensure that money flows ‘downstream’ so subcontractors don’t lose what is owed to them if the head contractor or principal becomes insolvent. We are committed to seeing the introduction of cascading statutory trusts and will continue to lobby the Government at every opportunity. Master Plumber | 14
Retention trust scheme Retention money is protected in a deemed trust to prevent it from being used for other purposes or lost altogether in an insolvency. This scheme applies all the way along the chain of contractors and subcontractors.
Anti-phoenixing Officers or managers of building and construction companies that have a history of defaulting on payments are unable to start a new company in the industry. The new law prevents the Building Services Board from issuing them with a new licence.
For further advice about the new law If you need further advice or any information about the new law and what it means for your business, please don’t hesitate to contact us on mail@mpawa.asn.au or 9471 6661.
