Getting paid on time: NSW's Security of Payment rules for subcontractors

You have finished the job, the invoice has gone in, and the money has stalled. For a subcontractor, a late payment is not just paperwork — it is wages, materials and the next job all caught in limbo. In New South Wales, the Building and Construction Industry Security of Payment Act 1999 sets out a structured process for claiming progress payments, and a round of changes that took effect in 2024 strengthened the protections for subcontractors and homeowners.

Here is a brief, plain-English update on how the system works and what recently changed.

What the Security of Payment laws do

The Security of Payment Act is designed to keep cash moving down the contracting chain, so the people doing the work are not left funding a project out of their own pocket. It gives most people who carry out construction work or supply related goods and services in NSW a statutory right to progress payments, along with a process to pursue that right without going straight to court.

The core sequence is:

• A payment claim is served. This is a document stating the amount being claimed and the work it relates to. As a general rule, a progress claim can be made once per month.
• A payment schedule is given in response. If the other party intends to pay less than the amount claimed, they are required to say so and give their reasons.
• Payment falls due. For a subcontractor, payment is due no later than 20 business days after the payment claim is made, unless the contract sets an earlier date. A contract can require faster payment, but it cannot extend beyond that statutory maximum.
• Adjudication is available if payment is not made. An independent adjudicator can decide the amount through a process designed to be quicker than court proceedings.

“Pay when paid” clauses have no effect

A common clause to watch for is “pay when paid” or “pay if paid” — wording that ties your payment to the head contractor being paid by someone further up the chain. Under the Security of Payment Act, these clauses have no effect. A subcontractor's right to be paid does not depend on whether anyone upstream has been paid first.

What changed in 2024

Amendments to the Act commenced on 20 August 2024, with a focus on protecting subcontractors and homeowners. The key points:

• Retention money protection. Where a head contractor holds “retention” money — the portion of each payment kept back as security until the work is signed off — there are rules requiring that money to be held in a trust account. Holding it on trust helps keep it quarantined if a head contractor becomes insolvent.
• Licence and insurance for residential work. A person carrying out residential building work who is not properly licensed, or who does not hold the required insurance, does not have a right to a progress payment under the Act. For residential work, keeping licensing and insurance in order is tied directly to payment rights.
• A Homeowners Notice for residential claims. When a builder serves a payment claim on a homeowner, it must be accompanied by a Homeowners Notice explaining why the claim has been received, how to respond, what happens if they do not, and how adjudication works.

What it means for subcontractors in the Hills District and NSW

The practical takeaway for a subcontractor in Baulkham Hills, Norwest, Castle Hill or anywhere across Western Sydney is that the Security of Payment process is structured and time-sensitive. It runs on strict deadlines: the dates for responding and for applying for adjudication are short. Understanding the steps — and keeping paperwork, licensing and insurance in order — is what allows the process to work as intended.

A note from Michael Campbell Law

Michael Campbell Law is a boutique Hills District practice with a particular focus on construction law. Michael is a civil engineer as well as a solicitor, with experience on NSW infrastructure projects.

Related reading: if a builder you work for is showing signs of financial trouble, see our guide on what to do if your builder becomes insolvent. And if the dispute is about the quality of the work itself, our guide to building defects and statutory warranties in NSW covers where owners and trades stand.

If you would like to understand how these rules apply to a project of your own, you are welcome to get in touch.

This article is general information only and not legal advice. The law described is current as at June 2026 and may change. For advice about your situation, contact a qualified solicitor.