Why does it matter if my payment claim is valid?
The answer lies in the words of the Building and Construction Industry Security of Payment Act NSW (Act) (often just called SOPA). A valid payment claim allows a claimant to proceed to adjudication and, in some circumstances, to recover the claimed amount as a debt where no payment schedule is served.
An invalid payment claim isn’t really a payment claim at all – it certainly can’t be adjudicated under the Act.
entitlement should be confirmed at the outset. Contract formation, regulatory compliance and scope must be considered before focusing on drafting
That may seem a small price to pay, but adjudication is a well-used tool, and for good reason. Between 1 July 2025 and 30 September 2025, greater than $150 million worth of adjudication applications were lodged in NSW. For the uninitiated, SOPA is designed to move quickly and decisively to protect cash flow. It (for the most part) achieves those goals.
Although there are multiple elements to a valid payment claim, each can be met with modest administrative discipline. There is no universal template that suits every project. What constitutes a “perfect” claim will depend on the contract, the scope of work and the commercial context. However, the statutory essentials are clear and manageable.
Entitlement: Confirming SOPA Applies
Before preparing a payment claim, entitlement under section 8 must be established.
A person must be engaged under a construction contract and must have undertaken to carry out construction work or supply related goods and services. SOPA defines a “construction contract” broadly as a contract or other arrangement under which one party undertakes to carry out construction work or supply related goods and services.
Two questions which can emerge are:
- What is an “other arrangement”?; and
- How wide is “construction work”?
The breadth of “other arrangement” is not unlimited. In GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd, the Court found that an informal oral arrangement did not meet the statutory threshold where essential matters – including materials, rates and timing – were not agreed. The case illustrates that where key commercial terms remain uncertain, the existence of a construction contract may be in doubt.
The scope of “construction work” is extensive, but not without carve-outs. Extraction-related activities, including drilling for minerals, are excluded. In Cadia Holdings Pty Ltd v Downer EDI Mining Pty Ltd, the Court determined that infrastructure works enabling mineral extraction were not themselves extraction works and therefore fell within SOPA.
Residential building work requires additional care. Section 8 makes clear that a person is not entitled to a progress payment where the contract does not comply with the licensing and insurance requirements of the Home Building Act 1989. Amendments to SOPA have reinforced that unlicensed or uninsured contractors are barred from making claims for progress payments under the Act.
The practical takeaway is that entitlement should be confirmed at the outset. Contract formation, regulatory compliance and scope must be considered before focusing on drafting (of your payment claim).
The Essential Elements of a Valid SOPA Payment Claim
Section 13 sets out the core requirements of a valid payment claim. Per that section, a payment claim must:
- identify the construction work (or related goods and services);
- indicate the amount of the progress payment claimed; and
- state that it is made under SOPA.
A payment claim must also be:
- made at the correct time; and
- served in accordance with the Act or the contract.
Each requirement is mandatory. None are conceptually complex.
Identifying the Work
The objective with payment claims is clarity. Descriptions of the work should be clear, and ideally should align with the language of the contract. Where possible claims should be broken into identifiable stages or items. References to drawings, variation numbers and schedules should be included where relevant. Supporting documents should be attached. Overly broad statements such as “works completed to date” should be avoided.
Ask yourself when submitting your payment claim “if I wasn’t the one who drafted this, would I know what I was asking for?”
In KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd, a claim that listed trade categories and percentages completed, but contained no meaningful description, supporting documentation and which was riddled with mathematical errors, failed to meet this requirement.
The Court emphasised that a payment claim must be reasonably comprehensible so that the respondent can respond within the statutory timeframe.
By contrast, in Manariti Plumbing Pty Ltd v Universal Property Group Pty Ltd, a claim consisting of an email, invoice, statement and spreadsheet was upheld. When viewed in context, it sufficiently identified the work notwithstanding the fact that the work itself was claimed in a manner not approved by the Contract. The court’s position was that provided the claim could be understood, the substantive dispute about entitlement was one best left until later.
The contrast between these cases demonstrates that perfection is not required. What is required is clarity, measured against the context of the parties’ agreement.
Indicating the Amount Claimed
This requires either a specific dollar amount or a clearly articulated method of calculation. The figure cannot be vague, uncertain or internally inconsistent.
In MWB Everton Park Pty Ltd v Devcon Building Co Pty Ltd, inconsistencies between tables and totals led to a finding that the claim did not properly state the amount being claimed. Where supporting schedules are attached, they must reconcile or else sufficient explanation of why they don’t should be offered.
For contractors, this is a matter of internal checking. Reconciliation before service is far easier than defending jurisdictional challenges later.
Stating the Claim Is Made Under SOPA
Tax invoices can present risk if they do not contain the required statement. A clear statement that the document is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW) will satisfy this requirement.
In Eco Steel Homes Pty Ltd v Hippo’s Concreting Pty Ltd, a misstatement of the Act’s name did not invalidate the claim because the statutory purpose was achieved. Nevertheless, strict compliance remains the prudent approach.
Timing: Reference Dates and the Backstop
A payment claim must be made on the date worked out under the contract or in accordance with SOPA.
Typically, this will be the contractual reference date, such as the 25th of each month. If the contract does not provide for reference dates, SOPA supplies default monthly dates. Only one claim may be made per relevant date.
There is also a statutory backstop. A payment claim may only be served within the period determined by the contract or within 12 months after the work was last carried out (whichever is later).
Section 13(6) clarifies that, although only one claim may be served in a particular named month, a claimant is not prevented from including multiple progress payments, previously claimed amounts or work from earlier months in a later claim.
Service: Getting the Mechanics Right
Finally, the payment claim must be served correctly.
Section 31 permits service by personal delivery, lodgement during normal office hours at the ordinary place of business, post, email to a specified address, contractual methods or otherwise as allowed by law.
Service gets a lot of air-time in Court disputes, but the advice for avoiding tripping up on this requirement is practical: serve on the earliest possible date, serve during ordinary business hours and where you can, default to service under the Corporations Act.
Contract vs Statute
SOPA establishes a statutory framework that operates independently of contractual dispute resolution mechanisms. Contractual requirements for progress claims do not necessarily invalidate a claim under the Act, provided the statutory requirements are met.
Attempts to contract out of SOPA are ineffective. In J Hutchinson Pty Ltd v Glavcom Pty Ltd, a contractual precondition to submitting a payment claim was held to be an impermissible attempt to limit statutory rights.
This reinforces the importance of understanding SOPA as a parallel regime that cannot be displaced by contract.
Conclusion: Discipline Over Complexity
There are multiple elements to a valid payment claim: entitlement, identification of work, indication of amount, statutory statement, timing and service. Each is essential.
However, none requires complex drafting. With appropriate systems, reconciliation checks and a clear understanding of the statutory framework, invalidity can be avoided.
A “perfect” payment claim will look different on every project. A cost-plus claim supported by spreadsheets may be appropriate in one context; a lump sum claim broken into stages may be appropriate in another. There is no universal template.
What remains constant is this: administrative discipline at the time of preparation is far less costly than jurisdictional challenges after service. In a regime designed to protect cash flow and operate at speed, getting it right the first time is not only prudent – it is essential.
