Responding to a payment request
Under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), a person who receives a payment claim is known as the respondent. A respondent is a party to the construction contract who has requested the work be done or goods or serviced to be provided and is or may be liable to make payment.
If you are a respondent, you are required under the BIF Act to ‘respond’ to all payment claims received – a payment claim should never be ignored.
When you receive a payment claim or invoice, there are two ways to respond:
Option 1: Pay the payment claim
If you agree with the claimed amount, simply pay the full amount by the due date. If you do not pay the full amount by the due date, then you will be subject to a penalty for not giving a payment schedule – a penalty of 100 penalty units applies.
Option 2: Respond with a payment schedule and pay by the due date
A payment schedule only needs to be given if you don’t agree with the amount claimed and intend to pay a different or lesser amount.
If you don’t intend to pay the full claimed amount by the due date, you must give the claimant a payment schedule within 15 business days after you are given the payment claim or invoice – or earlier if the contract states another timeframe.
A payment schedule is a written document which must:
- identify the payment claim to which is it responding
- state the amount – if any – you intend to pay
- state ALL reasons for paying the lesser amount or for withholding payment if you are proposing to pay less than the amount claimed.
It is really important to list all the reasons for withholding payment. If the claimant disputes the payment schedule or amount paid – and you have not responded – you may lose your right to respond in some cases.
The amount proposed to be paid in the payment schedule (the scheduled amount) is the amount that is payable by the due date.
It is offence not to pay what was proposed in the payment schedule by the due date - a penalty of 100 penalty units will apply.
The QBCC is conducting an audit from 2 November 2020 to 30 April 2021 to see if licensees are complying with their obligations to respond to a payment claim. Click here for more information about the audit program.
Reasons for providing a payment schedule
There are several reasons why you may not agree with a payment claim and choose to send a payment schedule instead, these include:
- you believe the claim was given incorrectly (e.g. not given on the correct reference date, or did not include required information)
- you do not believe the payment claim was intended to be given to you
- you are withholding a retention amount from the full amount claimed
- you disagree wholly or partially with the amount stated in the payment claim (e.g. not all the work was completed as claimed or agreed)
- there are other contractual performance issues.
An incorrectly given payment claim doesn’t mean the claimant is not entitled to payment but it may impact on legislative protections available. The QBCC recommends responding to all payment claims to avoid a dispute or possible offence.
Consequences for not responding to a payment claim
You should never ignore a payment claim.
Failing to respond may be an offence under the BIF Act and could trigger the following consequences for anyone under a construction contract:
- being fined by the QBCC
- losing your right to respond if the claimant pursues certain payment dispute resolution options
- having the claimant suspend work, instigate subcontractors’ charges or purse the debt in court.
As a QBCC licensee, you may also face additional disciplinary action from the QBCC if the claimant lodges a complaint against you, including:
- accruing demerit points against your licence
- having your licence suspended or cancelled.