The Ultimate Guide to Security of Payment in Queensland's Construction Industry

In the Queensland construction industry, cash flow is king. For contractors, subcontractors, and suppliers, the disruption caused by delayed, disputed, or non-existent payments isn't just an inconvenience—it's an existential threat. A single defaulted payment can cascade down the contractual chain, jeopardising project timelines, straining business relationships, and pushing viable companies towards insolvency. This is precisely why Queensland's Security of Payment legislation exists. It is not a complex burden to be feared, but a critical framework designed to protect your right to be paid for the work you do.

The central pillar of this protection is the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). This powerful legislation provides a rapid, cost-effective pathway for resolving payment disputes and ensuring money keeps flowing. This guide will provide a clear, comprehensive roadmap for navigating your payment rights and obligations in Queensland, empowering you to use the law as the shield it was intended to be.

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Key Takeaways

The BIF Act is Your Shield: The BIF Act is the primary legislation protecting your right to payment in Queensland. Understanding its strict timelines is non-negotiable.

Documentation is Everything: A valid payment claim is the first step to recovery. It must meet specific requirements to be enforceable. Similarly, a payment schedule must be issued on time to dispute a claim.

Adjudication Offers a Fast Track: When payment disputes arise, adjudication provides a rapid, legally binding resolution process outside of the traditional court system.

Don't Ignore QBCC's Role: The Queensland Building and Construction Commission (QBCC) enforces these laws and can take disciplinary action against non-compliant contractors, impacting their licence.

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What is Security of Payment and Why Does It Matter?

At its heart, security of payment refers to a specific set of laws enacted to ensure that anyone who performs construction work or supplies related goods and services in the construction industry gets paid on time.

The primary objective of this legislation is to protect and maintain healthy cash flow throughout the entire project hierarchy. By establishing a clear and rapid process for making and responding to progress payments, the law aims to prevent financial distress and insolvency from spreading down the contractual chain, which is a common cause of payment disputes.

Defining the Core Principle

The core principle is simple: you have a statutory right to be paid for the work you have done. These laws create a system where a person entitled to a progress payment can make a formal claim. The person liable to pay must either pay the full amount by the due date or formally dispute the claim within a very strict timeframe. If they fail to do so, they can become liable for the entire amount claimed, regardless of the contractual merits. This "pay now, argue later" philosophy is the engine that drives the entire system, ensuring that disputes over valuation or defects do not halt the flow of funds necessary for a project's continuation.

Who Do These Laws Protect?

The BIF Act has a deliberately broad scope to protect a wide array of participants in the Queensland construction industry.

This protection extends to:

• Head Contractors: Claiming payment from developers or principals.

• Subcontractors: Claiming payment from head contractors.

• Sub-subcontractors: Claiming from the subcontractor above them.

• Suppliers: Who provide materials and equipment to a site.

• Consultants: Including architects, engineers, and quantity surveyors who provide professional services for construction work.

Crucially, these protections apply whether your contract is a formal written document or a simple oral agreement. This makes the legislation a powerful and wide-reaching tool for securing payment across projects of all sizes, from major Brisbane CBD developments to residential builds on the Gold Coast. Understanding how these laws apply to your specific role is fundamental.

The High Cost of Ignoring the Rules

Warning: Failing to adhere to the BIF Act's strict procedures and timelines can have severe and often irreversible consequences. Missing a deadline by even a single business day can result in you losing your right to payment or, conversely, your right to dispute a claim you believe is inflated or incorrect. The system is unforgiving of procedural errors.

Furthermore, non-compliance is not just a contractual issue; it's a regulatory one. The Queensland Building and Construction Commission (QBCC) actively enforces these rules. A failure to pay an adjudicated amount can lead to disciplinary action, including fines and the suspension or cancellation of a contractor's licence.

If you find yourself in a complex situation, seeking assistance with QBCC matters is not just advisable, it's essential for protecting your business.

Unpacking the BIF Act: Your Primary Legal Shield

The BIF Act is the cornerstone of Queensland's security of payment regime. It establishes a complete statutory framework for making payment claims and resolving disputes that operates in parallel with any existing construction contract.

Its primary purpose is to provide a fast-track mechanism for dispute resolution—known as adjudication—that avoids the significant delays and costs associated with traditional court proceedings.

A detailed BIF Act guide can provide further context, but understanding its core components is non-negotiable for any industry participant.

Key Concepts You Must Understand

To navigate the BIF Act effectively, you must be familiar with its specific terminology. The Act gives precise legal meaning to everyday industry terms:

• Construction Work: This is defined very broadly and includes everything from traditional building and civil engineering to the installation of fittings, demolition, and professional design services.

• Payment Claim: This is not just any invoice. It is a written document that must identify the work it relates to, state the amount claimed, and crucially, include a statement that it is "a payment claim made under the Building Industry Fairness (Security of Payment) Act 2017."

• Payment Schedule: This is the respondent's formal written response to a payment claim. It must state how much the respondent intends to pay (the "scheduled amount") and provide detailed reasons for withholding any part of the claimed amount.

• Due Date for Payment: This is the date payment becomes due, as determined by the contract or, if the contract is silent, by the default provisions within the BIF Act.

• Adjudication Application: This is the formal application made to the QBCC to have a qualified adjudicator decide a payment dispute.

How the BIF Act Interacts with Your Contract

A critical feature of the BIF Act is that its protections are statutory rights, meaning they cannot be bargained away or signed out of. Any clause in a construction contract that attempts to exclude, modify, or restrict the operation of the BIF Act is void and unenforceable.

For example, a clause that states "The parties agree that the Building Industry Fairness (Security of Payment) Act 2017 does not apply to this contract" has no legal effect. While your contract will still govern the commercial terms of your agreement—such as the scope of work, rates, and timelines for variations to contracts—the BIF Act provides an overriding statutory safety net for payment.

This is a vital concept to grasp when negotiating terms or considering your options for terminating construction contracts.

The Payment Claim and Payment Schedule Process

The entire security of payment system is activated by a strict, timeline-driven exchange of documents. The process begins with the claimant issuing a payment claim (often referred to as a progress claim) and is followed by the respondent's reply, the payment schedule. Mastering this process is fundamental to protecting your rights under the BIF Act.

Crafting a Valid Payment Claim

Preparing a compliant payment claim is the essential first step. An invalid claim can be rejected, delaying payment and potentially jeopardising your rights. The process is straightforward but requires precision.

First, you must clearly identify the specific construction work or related goods and services to which the claim relates, referencing the relevant period and contract.

Second, you must state the amount you are claiming is due for payment.

Third, you must include a request for payment—simply using the word "invoice" on the document satisfies this requirement. The claim must also be accompanied by a supporting statement declaring that all subcontractors have been paid, or if not, providing details of any unpaid amounts.

Importantly, while the BIF Act simplified the endorsement requirements compared to the previous legislation, best practice strongly recommends that every payment claim includes a clear statement that it is "a payment claim made under the Building Industry Fairness (Security of Payment) Act 2017." Although the requirement for a specific prescribed format was removed in December 2018, including this explicit endorsement ensures the claim is immediately recognisable as a statutory payment claim, eliminates any ambiguity about your intention to rely on the Act's protections, and provides the strongest possible foundation for your rights.

The inclusion of this statement is widely regarded as essential practice by construction law practitioners. The claim must be correctly served on the respondent, which can be done via methods specified in the contract or as permitted by law, such as delivery in person, by post, or electronically to their nominated address in Brisbane or elsewhere.

Failing to include all required elements, particularly the statutory endorsement, can result in your claim being rejected as invalid, delaying payment and potentially jeopardising your ability to access the rapid adjudication process.

The Critical Role of the Payment Schedule

Once a respondent receives a payment claim, the clock starts ticking. They have a strict deadline—typically 15 business days or a shorter period if specified in the contract—to respond with a payment schedule.

This document is their one and only opportunity to formally dispute the claim before adjudication. The schedule must identify the payment claim it is responding to and clearly state the amount the respondent proposes to pay (the "scheduled amount"). If this amount is less than the amount claimed, the schedule must meticulously detail all reasons for withholding payment.

Vague statements like "work is defective" are insufficient. The respondent must specify which work is defective, why it is defective, and provide a valuation for the cost of rectification. New reasons cannot be raised later in an adjudication, so this document is critical. The schedule must then be served on the claimant before the due date expires.

What Happens if a Payment Schedule is Late or Missing?

Illustrative Example: Dave, a subcontractor, submits a valid payment claim for $50,000 to a head contractor for completed works on a Sunshine Coast project. The head contractor is managing multiple sites and, amidst the chaos, forgets to issue a payment schedule within the required 15 business days. On the 16th business day, Dave realises no schedule has arrived. Under the BIF Act, the head contractor has now become liable for the full $50,000 claimed by default, simply due to their failure to respond in time. They have lost their right to dispute the amount or raise any issues about defects in an adjudication. Dave can now proceed to adjudication or court to recover the full amount as a statutory debt.

This common scenario underscores the severe consequences of inaction and highlights why seeking timely advice from an expert building and construction lawyer is crucial for both claimants and respondents.

When Disputes Arise: Navigating Adjudication

When a payment dispute cannot be resolved through the initial exchange of a payment claim and payment schedule, the BIF Act provides a powerful mechanism for rapid dispute resolution: adjudication. This process is designed to be faster and more cost-effective than traditional court litigation, ensuring that payment disputes don't derail a project's progress.

What is Adjudication?

Adjudication is a formal, interim dispute resolution process tailored specifically for the construction industry. Its purpose is to provide a quick, legally binding decision on a payment dispute to keep money flowing down the contractual chain. It is not a full court hearing; it is a "rough and ready" justice system that operates on a strict timeline, with decisions typically made within 10-15 business days of an adjudicator being appointed. The entire process is administered by the Adjudication Registry at the Queensland Building and Construction Commission (QBCC).

The resulting decision, while interim, is fully enforceable, providing a powerful tool for claimants to secure payment without the lengthy delays of litigation.

Initiating an Adjudication Application

An adjudication application can be initiated following specific trigger events. The most common are when a claimant receives a payment schedule for less than the amount claimed, or when the respondent fails to pay the full claimed amount by the due date after not providing a schedule at all.

The claimant must then prepare and lodge their application with the QBCC within very strict statutory timeframes, which vary depending on the trigger event. This application is the claimant's primary opportunity to state their case. It must include the payment claim, the payment schedule (if any), and all submissions, evidence, and arguments the claimant relies on to prove their entitlement to the claimed amount.

Getting this application right is critical, as the opportunity to introduce new material later is extremely limited.

The Adjudicator's Decision and Its Effect

Once an application is accepted, the QBCC appoints a qualified adjudicator from its registry. The adjudicator reviews the application and any response from the other party to make a formal decision. This decision will determine the amount (if any) that must be paid, the date by which it must be paid, and the applicable rate of interest on any overdue payment.

The adjudicator's decision is legally binding on the parties unless it is successfully challenged and overturned in a higher court on limited grounds of jurisdictional error. For many disputes, this decision is the final word. If a party is dissatisfied with a QBCC process or decision, their avenue for review may lie with the Queensland Civil and Administrative Tribunal (QCAT), a process detailed in our guide to QCAT in Queensland.

The QBCC's Role in Upholding Payment Rights

Beyond simply administering the adjudication registry, the QBCC serves as the primary regulator for Queensland's building and construction industry. Its role is to ensure compliance with key legislation, including the BIF Act and the Queensland Building and Construction Commission Act 1991 (QBCC Act).

This gives the commission significant power to investigate complaints about non-payment and to take disciplinary action against licensees who fail to meet their financial and administrative obligations, which can have a direct impact on their QBCC licence.

The QBCC as Industry Regulator

The QBCC's regulatory functions are extensive. It investigates allegations of non-payment and can compel parties to provide information and documents. If a contractor is found to have failed to pay a debt, including an adjudicated amount, the QBCC can take disciplinary action.

This can range from issuing warnings and directions to pay, to imposing fines, and in serious or repeated cases, suspending or cancelling a contractor's licence. This enforcement role is a critical part of the security of payment framework, adding a layer of regulatory risk for any party that fails to comply with its payment obligations under the BIF Act.

Consequences of Failing to Comply with a Payment Direction

Warning: Ignoring an adjudicator's decision is not a viable business strategy; it is a serious regulatory offence with severe consequences. If a respondent fails to pay an adjudicated amount by the due date, the claimant can notify the QBCC. The QBCC can then issue a formal direction to the respondent to pay the outstanding amount. Failure to comply with this direction can lead to the automatic suspension of the respondent's licence. Continuing to trade with a suspended licence is a further offence. This regulatory power means that facing a payment dispute that has progressed to an unfavourable adjudication decision requires immediate and expert legal counsel to avoid catastrophic impacts on your ability to operate.

How QBCC Decisions Are Reviewed

If a licensee is subject to a QBCC decision, such as a disciplinary action for non-payment, they have the right to have that decision reviewed. These reviews are typically conducted by the Queensland Civil and Administrative Tribunal (QCAT).

However, challenging the regulator is a significant undertaking that requires a robust and well-prepared case. Statistics show that the tribunal often sides with the regulator's initial findings. Historically, only a small percentage of QBCC decisions reviewed by QCAT are set aside, demonstrating that a successful challenge is the exception, not the rule.

This underscores the importance of ensuring compliance from the outset to avoid reaching this stage.

Enforcing a Favourable Adjudication Decision

Receiving a favourable adjudication decision is a major step, but it is not the final one if the other party still refuses to pay. The BIF Act provides a clear and powerful process for enforcing payment of an adjudicated amount, effectively converting the decision into a court judgment that can be used for debt recovery. This is an area where the expertise of a litigation lawyer becomes invaluable.

From Decision to Enforceable Certificate

After winning an adjudication and the respondent has failed to pay by the due date, the first step is to request an adjudication certificate from the QBCC. This certificate formally states the amount decided by the adjudicator. The claimant can then file this certificate, along with a sworn affidavit, in a court of competent jurisdiction—such as the Magistrates Court for smaller amounts or the District Court for larger sums.

Once filed, the certificate is deemed to be an order of that court and has the same force and effect as a judgment debt. This simple administrative process transforms the adjudicator's decision into a powerful enforcement tool.

Your Options for Enforcing the Debt

Once the adjudication certificate is registered as a court judgment, the claimant gains access to the full suite of standard legal enforcement options.

The most common methods include:

• Statutory Demand: For a corporate debtor, issuing a statutory demand for the debt. If the company fails to pay or apply to set it aside within 21 days, it is presumed to be insolvent, which is a precursor to winding up the company.

• Warrant for Seizure and Sale of Property: Obtaining a court order that allows a bailiff to seize and sell the debtor's assets (such as vehicles or equipment) to satisfy the debt.

• Garnishee Order: Securing an order that requires a third party who owes the debtor money (like a bank or a client) to pay that money directly to the claimant instead.

Choosing the most effective option requires a strategic assessment of the debtor's circumstances, a task best handled by construction litigation experts.

Suspending Work for Non-Payment

The BIF Act grants a claimant a powerful commercial lever: the right to suspend work for non-payment of an adjudicated amount. If a claimant has an adjudication decision in their favour and the respondent fails to pay, the claimant can suspend the work they are contracted to perform.

To do this lawfully, the claimant must provide the respondent with at least two business days' written notice of their intention to suspend work. A contractor who correctly follows this process is protected from any claims for damages or breach of contract by the respondent for the period of the suspension. This right can apply significant pressure on a non-paying party to settle the debt to ensure the project continues.

Staying Ahead: Recent Changes to Queensland's Payment Laws

Queensland's construction laws are not static. The government periodically introduces legislative updates to refine processes, address emerging issues, and enhance industry fairness. Staying informed about these legal changes is essential for maintaining compliance and managing risk. The most recent significant amendments came with the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2024 (BIF Amendment Act 2024).

Understanding the 2024 Amendments

The primary focus of the BIF Amendment Act 2024 was to streamline and simplify the project trust accounts framework, which is a key component of the BIF Act designed to protect subcontractor payments. The government's stated goal was to reduce the administrative and financial burden on contractors, particularly head contractors who act as trustees.

Key changes included the removal of the requirement for trustees to undertake mandatory retention trust training and the elimination of the need to engage an external auditor for an annual account review report. These changes reflect a move towards simplifying compliance where possible, without undermining the core protections of the trust account system.

The Evolution of Project Trust Accounts

To understand the recent changes, it's helpful to have some context. The current project and retention trust account framework was introduced following amendments in 2020. This system replaced the previous, more limited Project Bank Accounts (PBAs) regime. The fundamental purpose of these trust accounts is to quarantine funds—both progress payments and cash retentions—that are owed to subcontractors. By holding this money in a separate trust account, it is protected in the event of the head contractor's insolvency, ensuring subcontractors are more likely to be paid what they are owed.

However, it is important to note that the further rollout of the project trust account framework has been paused indefinitely by the Queensland Government from 31 January 2025. The rollout was originally scheduled to expand to all contracts valued at $3 million or above by March 2025 and $1 million or above by October 2025, but the Government has not provided a specific timetable for when enforcement will resume. The decision was made due to factors including the vulnerability of the construction industry, ongoing insolvency risks, lack of available software, and the need to improve awareness of the regulatory regime.

Currently, the regime only applies to:

• Construction contracts with the State Government and Hospital/Health Services valued $1 million and above; and

• Construction contracts with local government and private industry valued $10 million and above.

The Queensland Productivity Commission is expected to undertake a review of the construction industry before new rollout dates are determined. This legislative evolution demonstrates a consistent focus on enhancing subcontractor protection within the industry, balanced against practical implementation challenges. For more background on legislative developments, readers can visit our publications hub.

What These Changes Mean for Your Business

Staying informed about legislative changes is a cornerstone of effective risk management in the construction industry. While the 2024 amendments simplified some administrative aspects of the trust account framework, the core obligations under the BIF Act remain as stringent as ever. The strict timelines for payment claims and schedules, the rules for adjudication, and the QBCC's enforcement powers are all unchanged.

It is crucial for businesses to regularly review their contracts, payment procedures, and internal compliance systems to ensure they align with the latest version of the law. Proactive consultation with legal experts like John Merlo can help identify potential compliance gaps and ensure your business is always operating on a secure legal footing.

Conclusion

The Building Industry Fairness (Security of Payment) Act is more than just legislation; it is a fundamental tool for survival and success in the Queensland construction industry. It provides a powerful shield for contractors, subcontractors, and suppliers, but only for those who understand how to use it.

The key takeaways are clear: the BIF Act provides a statutory right to payment that cannot be contracted out; strict adherence to the processes for payment claims and schedules is vital to preserving those rights; adjudication offers a rapid and binding remedy for disputes; and the QBCC rigorously enforces compliance with potentially severe consequences for your licence.

While the law offers strong protections, navigating its complexities requires diligence, precision, and expertise. Whether you are drafting a payment claim, responding to one, or facing a dispute that requires adjudication, a single misstep can be costly. If you are experiencing payment issues or want to ensure your business processes are fully compliant, seeking specialised legal advice is the most effective way to protect your financial interests and ensure your business's long-term longevity.

For further reading, please see our comprehensive guide to building and construction law.

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FAQs

What is the single most important thing to include in a payment claim in Queensland?

The most critical elements are:

(1) clearly identifying the construction work or related goods and services;

(2) stating the claimed amount;

(3) requesting payment (simply using the word "invoice" is sufficient); and

(4) including a supporting statement about subcontractor payments. While the BIF Act no longer requires a specific prescribed format for endorsement (this rigid requirement was removed in December 2018), it is essential best practice to include a clear statement that the claim is "made under the Building Industry Fairness (Security of Payment) Act 2017." This endorsement eliminates any ambiguity about your statutory rights and is considered fundamental by experienced construction lawyers. The claim must also be served correctly and within the time limits specified in your contract or the Act.

How long do I have to respond to a payment claim?

You must serve a payment schedule on the claimant within 15 business days of receiving the payment claim, or by an earlier date if one is specified in your contract. Missing this deadline means you become liable for the entire amount claimed by default.

Can I introduce new reasons for non-payment during adjudication?

No. The adjudicator can only consider the reasons for withholding payment that were detailed in your original payment schedule. Any new reasons you try to raise in your adjudication response will be disregarded. This makes the payment schedule a critically important document.

Is an adjudicator's decision final?

An adjudicator's decision is binding and enforceable as a court judgment. While it is technically an "interim" decision (meaning the dispute could be re-litigated in court later), it is final unless successfully challenged in a higher court on very limited grounds, such as a denial of natural justice or jurisdictional error. For most disputes, it is the final practical step.

What happens if a company ignores an adjudication decision and a QBCC direction to pay?

The consequences are severe. The QBCC can immediately suspend the company's builder's licence, preventing them from legally carrying out building work. The claimant can also register the adjudication certificate in court and begin enforcement action, such as issuing a statutory demand which can lead to the company being wound up in insolvency.

Does the BIF Act apply to residential homeowners?

The BIF Act generally does not apply to contracts between a building contractor and a homeowner who resides in or intends to reside in the property where the work is being done. These contracts are primarily governed by the Queensland Building and Construction Commission Act 1991 (QBCC Act).

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This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law

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