Security of payment (SOP)

Effective 1 March 2021, the Building and Construction Industry Security of Payment Regulation 2020 (NSW) Schedule 2 has introduced important consequences for owners and builders on all residential building in NSW where the owner occupies or plans to occupy the home at the end of the project. Read more about the changes in NSW here.

Security of Payment (SOP) legislation is in effect in each Australian state and territory. SOP is aimed at standardising payment processes for construction work or the supply of related goods or services work performed under a construction/building contract. As a general rule, the SOP legislation only applies to construction work or the supply of goods and services under a construction/building contract for commercial construction contracts and in some states and territories, it will also apply to residential work.

For example, in NSW residential building work is excluded if the principal resides in or proposes to reside in the premises and in the case of owner occupier construction contracts to which the Act does not apply. Whereas in Tasmania, building or construction-related goods and services extends to a residential structure. 

The same basic principles apply across all jurisdictions, although there are some notable differences. As each state and territory define “construction work”, “building work” and “related goods and services” slightly differently to each other, it is important to know the exact differences and any exclusions to the definitions that may apply. Therefore, information for the state or territory in which the project is to be carried out should also be referred to.