New NSW Security of Payment regulation and residential occupation certificate reminder08 September 2020
The Building and Construction Industry Security of Payment Regulation 2008 (NSW) was replaced by the Building and Construction Industry Security of Payment Regulation 2020 (NSW) (Regulation) on 1 September. The Regulation is in the same form as the regulation it replaced, except for the following differences:
- a head contractor must now ensure that retention money is paid into the retention money trust account no later than five business days after the retention money is retained
- withdrawal of retention money from a retention money trust account to pay an adjudicated amount is now specifically allowed
- the requirement for a head contractor to provide an annual account review report has been removed, including for the 2019/20 financial year
- a head contractor must now keep a separate ledger for retention money held in respect of each subcontractor in connection with each construction contract, and provide the subcontractor with a copy of the ledger every three months (or as agreed with the subcontractor but at least every six months)
- the maximum corporate penalty for the offences relating to retention money trust accounts has been increased from 200 penalty units (currently $22,000) to 1,000 penalty units (currently $110,000), and
- eligibility requirements have been introduced for adjudicators.
The consultation draft of the Regulation reduced the threshold value of head contracts, to which the requirement for head contractors to place subcontractor retention money in trust would apply, from a value of at least $20 million to a value of at least $10 million. Despite this, the threshold of $20 million remains unchanged in the Regulation.
The Regulation also removes the exemption of owner occupier construction contracts from the application of the New South Wales security of payment legislation from 1 March 2021.
As advised in our previous Alert, developers who intend to apply for an occupation certificate for a class 2 building or a component of it before 28 February 2021 must give a notice to the Secretary of the NSW Department of Customer Service by 15 September 2020. The form of the notice to be given can be found on this page of the NSW Government Fair Trading website.