It starts with your Bookkeeper
Basically, make sure that your clients are aware that you are covered by the Building and Construction Industry Security of Payment Act 2002, by adding this simple line to your invoices.
"All invoices will come under The Building and Construction Industry of Payment Act 2002. Please get in touch if you cannot pay by the due date to organise a Payment Plan."
Do not hesitate to give us a call if you need a hand with editing your invoice template.
A little more about the Security of Payment Act 2002 (SOP Act)
Whether verbal, in writing or a combination of both, every day, individuals and organisations enter into contracts for building and construction and sometimes disputes arise over payment.
The SOP Act helps ensure that any person who carries out construction work or supplies related goods and services under a construction contract gets paid faster and without the need for lawyers.
Security of Payment laws operate in all states and territories in Australia. If you haven any questions about SOP, click on this link for contact details for the responsible agencies.
The SOP Act applies to most contracts for building work or for the supply of related goods and services in Victoria. - Domestic building contracts between a builder or supplier and the home owner are not covered. These come under the Domestic Building Contracts Act 1995.
- Contracts between a home owner’s building contractor and any subcontractor or supplier are covered. The SOP Act applies to the following types of work:
residential and non-residential building
civil engineering
demolition
electrical
professional services (e.g. architecture, design, surveying)
hire of plant and equipment
landscaping
maintenance
mechanical air conditioning
plumbing
supply of building material.
Claims may be made under the SOP Act for 'progress payments' for work done or supplies made since a date determined by the contract or under the SOP Act.
Contractors have a statutory right to receive progress payments. If the contract does not specify when the contractor is entitled to be paid, the SOP Act sets the date. Any 'paid when paid' or 'paid if paid' clauses in the contract have no effect.
SOP process reproduced from Victorian Building Authority
1. Payment claim
A person who has carried out work or supplied goods or services under a construction contract in Victoria (the claimant) can claim progress payments by giving a ‘payment claim’ to the relevant contractor, purchaser or client (the respondent). A payment claim specifies the work, goods or services supplied and the amount claimed and states that it is made under the Building and Construction Industry Security of Payment Act 2002.
2. Payment or payment schedule
The respondent can pay in full or, if they dispute the amount due, give the claimant a ‘payment schedule’. A payment schedule states how much the respondent is willing to pay and why it is different from the amount claimed. A respondent who fails to provide a payment schedule within 10 business days or as required by the contract – whichever is earlier – is liable to pay the full amount claimed.
3. Adjudication option
If there is a dispute about payment, the claimant can apply for adjudication by contacting an Authorised Nominating Authority (ANA). The ANA nominates an adjudicator with the necessary skills and experience to adjudicate the dispute. After accepting nomination, the adjudicator has 10 business days (or up to 15 business days if the claimant agrees) to determine what amount (if any) the respondent should pay, and when. In some cases, if the adjudicated amount exceeds $100,000 either party can apply for an adjudication review.
4. Court assistance
A claimant may choose to go to court to resolve a payment dispute rather than apply for adjudication. This is done by lodging a complaint with the Magistrates' Court or a writ in the County Court or the Supreme Court, depending on the value of the claim. The claimant can also go to court to enforce payment of an adjudicated amount. An adjudication certificate is filed in the court, with an affidavit attesting that the respondent has failed to pay, and the court can issue a warrant or other order requiring payment.
5. Recovery from respondent's principal
In certain circumstances where a respondent has failed to pay the adjudicated amount, the claimant may seek payment from the respondent’s principal.
Now that you are aware of the steps that need to be taken, you can work back to ensure that you do the right thing at every stage of collecting payment starting with the invoice.
References:
Victorian Legislation: https://www.legislation.vic.gov.au/in-force/acts/building-and-construction-industry-security-payment-act-2002/012
Victorian Building Authority: https://www.vba.vic.gov.au/building/security-of-payment#:~:text=The%20Building%20and%20Construction%20Industry,a%20construction%20contract%20gets%20paid.
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