The NSW Government has significantly reformed NSW’s security of payment legislation, through an amendment Act which was passed into law in November 2018 and an amendment Regulation which was published (in the same form as the public consultation draft) today.
Today the NSW Government also confirmed that all the amendments will commence on 21 October 2019. The amendments will therefore apply to construction contracts entered into after that date.
As we have covered in earlier updates,1 the amendments are broad and significant, and among other things:
- Executive and accessorial liability now applies, exposing directors and management personnel to prosecution if a corporation commits an offence under the Act.
- Authorised officers will be entitled to issue penalty infringement notices (‘on the spot fines’) for certain offences.
- Payment claims must again state that they are made under the Act.
- The progress payment and payment claim provisions have been simplified with the ‘reference date’ concept removed.
- The due date for payment by head contractors has been reduced from 30 to 20 business days.
- Residential owner occupier contracts are exempted from the Act.
- Companies in liquidation can no longer make a payment claim or seek to enforce them.
- The threshold requirement for head contractors to pay subcontractor retention moneys into a trust account has reduced from projects over $20 million, to projects over $10 million.
What this means for you
Parties participating in construction projects in NSW now have three months to consider how the reforms affect them. Construction contracts, project management and administration practices should be reconsidered and refreshed as required to ensure compliance (although, as mentioned above, the reforms will not apply to contracts entered into before 21 October 2019). If the amendments affect you, consider contacting us to discuss further.
- Our update on the amendment Act is here NSW Security of Payment reform: what you need to know and our update on the amendment Regulation is here NSW security of payment reform update: what you need to know
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2020