Update: Security of Payment Amendments in NSW receive Royal Assent

Publication February 04, 2019

By way of update to our previous article (which can be found here),1  the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amendment Act) was assented to on 28 November 2018. A commencement date for Amendment Act has not yet been declared.

Since receiving Royal Assent, the Department of Finance, Services and Innovation has issued a paper entitled “Security of Payment Reforms – Implementation, Options Paper – December 2018” (Paper).2  The Paper sheds further light as to the operation of certain amendments introduced by the Amendment Act, outlines proposed commencement options for those reforms, outlines proposed reforms to the Building and Construction Industry Security of Payment Regulation 2008 (NSW) (Regulation) and seeks stakeholder feedback as to these proposals.

The key information from our review of the Paper is as follows:

  1. The Paper proposes that the reforms have staggered commencement dates as follows:
    1. for those reforms which do not require either subordinate legislation or significant preparation time by industry stakeholders (such as the investigation and enforcement powers of Fair Trading, the prohibition on companies in liquidation serving or enforcing payment claims etc.) – a commencement date of February 2019 is proposed;
    2. for those reforms which require preparation time before commencement (such as abolishing the ‘reference date’ concept and establishing a monthly entitlement to progress claims, amending the due date for payments to subcontractors, the re-introduction of the payment claim endorsement etc.) – a commencement date of 1 June 2019 is proposed; and
    3. for those reforms which require subordinate legislation or administrative changes before commencement (such as the removal of the owner-occupier exemption, the Code of Practice for Authorised Nominating Authorities etc.) – a commencement date of December 2019 is proposed.
  2. The Paper confirms that the ‘owner-occupier’ exemption will be transferred to the Regulation. The Paper does not shed light as to whether future reforms to the Regulation will remove, alter or preserve this exemption.
  3. The Paper envisages that draft reforms to the Regulation will be available for consultation in May 2019 and the proposed reforms will include:
    1. reducing the monetary threshold for retention money trust account (RMTA) requirements from projects with a value of at least $20 million to at least $10 million;
    2. abolishing RMTA annual reporting requirements in clause 16 of the Regulation;
    3. increased regulation in relation to the inspection of RMTA records;
    4. prescribing penalty infringement notice offences for contraventions of the Building and Construction Industry Security of Payment Act 1999 (NSW) or Regulation;
    5. increasing penalty units for certain offences under the Regulation; and
    6. expanding the application of executive liability offences.

Interestingly, the Paper invites stakeholder feedback as to whether any specific reforms in the Amendment Act ought to have retrospective effect.

We will continue to keep you abreast of further developments in relation to the Amendment Act.


Footnotes

1 Note that since writing our previous article, the bill was amended slightly prior to being passed by both Houses of Parliament and receiving Royal Assent, with no significant changes to report.

2 The Paper can be accessed here.


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