What Is the Security of Payment Act? A Complete Guide for Australian Subcontractors

What Is the Security of Payment Act?

The Security of Payment Act (often called the SOP Act) is legislation that exists in every Australian state and territory. Its purpose is straightforward: to give subcontractors and contractors a fast legal mechanism to recover unpaid invoices for construction work — without needing to go to court.

In Australia, the construction industry has historically been plagued by slow or non-payment down the contracting chain. Head contractors delay paying subcontractors. Developers delay paying head contractors. Meanwhile, small subcontractors — who have already performed the work and paid their workers and suppliers — are left chasing money that is legally theirs.

The SOP Act changed this. It created a statutory right to payment and a fast-track dispute resolution process called adjudication that can resolve payment disputes in weeks rather than months or years.

Who Does the SOP Act Cover?

The SOP Act covers anyone who has carried out construction work or supplied related goods and services under a construction contract. This includes:

• Subcontractors of all trades (electrical, plumbing, carpentry, concreting, roofing, etc.)
• Head contractors claiming from principals or developers
• Engineers and consultants providing construction-related services
• Suppliers of construction materials under a construction contract

Residential construction work is excluded in some states, but most commercial, industrial and civil construction is covered.

How the SOP Act Works — The Key Steps

Step 1: The Payment Claim

The process begins when you serve a payment claim on the head contractor or principal. This is a formal document — more than just an invoice — that must meet specific requirements under the relevant Act. The most important requirement is the statutory statement: a sentence identifying the document as a payment claim made under the Act.

Step 2: The Payment Schedule (or Silence)

The respondent (head contractor or principal) has a set period to respond with a payment schedule. In most states this is 10 business days. The payment schedule must specify how much they intend to pay and the reasons for any withholding.

If the respondent fails to serve a payment schedule within the statutory period, they become liable for the full claimed amount as a debt due and payable. This is one of the most powerful features of the Act.

Step 3: Adjudication (if needed)

If the respondent disputes the amount or ignores your claim, you can apply for adjudication — a binding determination by a registered adjudicator. The adjudicator considers both sides’ submissions and issues a determination, typically within 10 business days.

The SOP Act in Each State

Why Most Subcontractors Never Use It

Studies consistently show that over 90% of subcontractors who are owed money never use the SOP Act. The reasons are almost always the same:

1. They don’t know it exists. Most trade contractors have never been told about the Act by their employer, union or industry body.
2. They think they need a lawyer. Lawyers typically charge $5,000–$15,000 to run a SOP Act claim. For a $30,000 invoice, that’s a significant chunk of the money owed.
3. They don’t want to damage the relationship. A common fear — though ironically, a party who owes you money and won’t pay it has already damaged the relationship.
4. They’re not sure if they qualify. The legal language of the Acts is complex and intimidating.

PayClaim was built to solve all four of these problems. Our AI analyses your entitlement in seconds, generates a legally compliant payment claim, serves it automatically, and tracks every deadline — for $69 per claim.

Key Takeaways

• The Security of Payment Act is available in every Australian state and territory
• It covers most commercial, industrial and civil construction work
• A valid payment claim triggers a strict 10-business-day response window
• If the contractor doesn’t respond, the full amount becomes a debt due and payable
• You don’t need a lawyer — PayClaim automates the entire process for just $69

Owed money? You can start your Letter of Demand here — see the whole letter free, then a flat $69 to issue it. PayClaim is not a law firm; payment outcomes are not guaranteed.