Now law: what you need to know about WA’s security of payment overhaul

The Building and Construction Industry (Security of Payment) Amendment Act 2026 (WA) (Amendment Act), Act No. 16 of 2026, passed the Legislative Council on 13 October 2026 and received Royal Assent on 21 October 2026. The Amendment Act fundamentally reshapes how payments are protected on WA government construction projects and will significantly amend the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act), which governs payment rights and dispute resolution across the WA building and construction industry.

In practical terms, the Amendment Act will:

1. Replace the WA government's existing project bank account (PBA) framework, which requires dedicated bank accounts and extensive documentation to protect subcontractor payments, with a new statutory construction trust regime. The regime will apply automatically to non-exempt contracts where a State Agency is principal, the head contractor is not a State Agency or Government Trading Enterprise (GTE), and the contract value at the time it is first entered into is at least the prescribed construction money threshold (currently expected to be set at $1.5 million by regulation). Contracts with a State Agency or GTE can opt in only if, when first entered into, they expressly provide that they are trust contracts.
2. Introduce compulsory Claim Statements: formal written disclosures about subcontractor payment status for every claim, including payment claims under the SOP Act and contractual claims, under contracts where the head contractor is not a State Agency or GTE and the principal is a State Agency regardless of value, and under GTE contracts where the contract expressly provides that Division 1A applies.
3. Create a same-day payment exception on State Agency contracts, enabling faster payment flows down the contracting chain.
4. Remove the one-business-day deadline for serving adjudication documents (adjudication being the statutory dispute resolution process under the SOP Act for resolving payment disputes).

The compliance stakes will be raised considerably. Principals (the party engaging the head contractor, typically the government entity) may withhold payment where a Claim Statement or further information has not been given, or where the principal reasonably believes that the statement or information is false or misleading in a material particular, does not comply with Division 1A, or the head contractor has not complied (or, if paid, will not comply) with Part 4 trust obligations (s27D(1)). An adjudication application is deemed withdrawn only where it was made before the withholding and has not been finally determined (s27F).

For practical guidance on what these changes mean for your business and what steps to take now, see our companion article: Now law: what head contractors, subcontractors and government entities should do now.

When the changes take effect

Part 1 of the Amendment Act (short title and commencement) came into operation on 21 October 2026, the day of Royal Assent. The rest of the Amendment Act, including the construction trust, Claim Statement and withholding regimes, the same-day payment exception, adjudication service changes and the amendments to the SOP Act, has not yet commenced and will commence on a day or days fixed by proclamation. Different days may be fixed for different provisions, so staged commencement is possible. As at the date of this article, no proclamation has been made.

Transitional arrangements

Construction trusts do not apply to contracts entered into before Division 2 commences, or to later contracts connected with them, unless regulations provide otherwise (s120D(3)-(4)).

Construction trust regime

Who it covers

The Amendment Act will establish a statutory construction trust regime that will replace the PBA model for WA government projects. Under a construction trust, payments received by a head contractor are held on trust, meaning they are legally ring-fenced and must be used to pay subcontractors rather than treated as the head contractor's own money. The scheme will apply to construction contracts in Western Australia where:

• the principal is a State Agency (as defined in the Procurement Act 2020 (WA), which captures government departments and statutory authorities such as the Department of Finance and Main Roads WA) and the value of the contract is at least the prescribed construction money threshold (expected to be set by regulation at $1.5 million, inclusive of GST);
• the principal is a State Agency or GTE (as defined in the Government Trading Enterprises Act 2023 (WA), including entities such as DevelopmentWA, Western Power and the Water Corporation), the head contractor is not a State Agency or GTE, and when first entered into, the contract expressly provides that it is a trust contract for the purposes of the Division;
• the contract is a 'first-tier subcontract', under which a State Agency or GTE is the head contractor, the subcontract expressly provides at the time it is first entered into that it is a trust contract for the purposes of the Division, and the subcontractor is not a State Agency or GTE (s76D).

A trust contract remains a trust contract despite any later variation or other amendment (s76B).

Certain categories of contracts will be prescribed by regulation as exempt contracts (s76A). As indicated in the Minister's Second Reading Speech, exemptions are expected to cover professional services, maintenance work, short-term projects under three months and residential housing. At present, these categories have not been finalised.

Comparing the current PBA model with the new construction trust scheme

The key operational differences between the existing PBA framework and the new construction trust regime are summarised in the table below:

New obligations

Contractors subject to the scheme must comply with the following obligations:

• Trust account: The construction trust account must be opened within 10 business days after entering into the Trust Contract, or within any period specified in the contract (s76L(2)). As soon as practicable, the trustee must give written notice to each beneficiary and the contracting party stating the recognised financial institution, account name, BSB and account number, and that all construction payments must be paid into the account (s76M).
• Payments into the account: The principal must pay all construction payments into the construction trust account, including amounts payable under adjudicator or review adjudicator determinations, arbitration or expert decisions, and court or tribunal orders. If a payment is made into another account held by the trustee, the trustee must transfer the same amount into the construction trust account within 24 hours of becoming aware of it (s76N).
• Retention money: A single, separate retention money trust account must be maintained for all retention money under each Trust Contract. The construction trust account cannot double as the retention money trust account.
• Permitted payments: Withdrawals are permitted only for listed purposes, including payments relating to a beneficiary's beneficial interest, payments in accordance with adjudication, arbitration, expert or court decisions, returning money paid in error, transfers to another trust account, accrued interest and a limited trustee indemnity (s76P). Separately, a beneficiary's construction payment entitlement is limited to amounts certified, scheduled or agreed in writing (the highest applies if they differ) or as determined by a court, tribunal or other decision-maker (s76J).
• Shortfall obligation: A shortfall obligation arises where the account holds insufficient funds to pay amounts due to a beneficiary on the day a construction payment is paid in. The trustee must immediately deposit the difference. This does not apply to an insolvent trustee (s76O).
• Criminal penalties: A party who, without reasonable excuse, fails to comply with s74(1) (paying retention money into a retention money trust account) or s79(3)(a) (allowing beneficiaries to inspect and copy trust records) commits an offence punishable by a fine of $50,000. There is no equivalent offence for failing to open a construction trust account under the new Division 2.
• Anti-avoidance: A related entity includes family members, related bodies corporate, corporations in which the party or a family member has at least a 50% interest, persons holding at least a 50% interest in the party and their family members, certain trustees or beneficiaries of non-construction trusts, and prescribed persons. The anti-avoidance rule applies only where the related entity is a beneficiary of the construction trust for the other trust contract; it does not apply to State Agencies or GTEs (s76E).
• Prohibition on assignment and cross-contractual set-off: An assignment by a subcontractor of its trust entitlement is of no effect. The trustee may not offset liabilities of the subcontractor under another contract against the subcontractor's entitlement (s85A). This provision does not prohibit set-off under the same contract.
• Other trust features: The head contractor is trustee and beneficiary, and has a beneficial interest in advance payments for costs or margin only if the Trust Contract expressly provides for it (s76G). Principals making advance payments are beneficiaries (s76H); a subcontractor's entitlement arises when work is carried out, whether or not claimed or payable (s76I); and the trust dissolves on the date specified in the contract or otherwise on the earlier of six months after the last day for a final payment claim under s23(5) or when only exempt work remains (s76K). Interest belongs to the trustee except interest earned after money becomes payable to a beneficiary, and account fees are payable by the party establishing the account (s78).

New payment regime requirements

Claim Statements

Once Division 1A commences, each claim under a relevant construction contract where the head contractor is not a State Agency or GTE and the principal is a State Agency (regardless of value and even if it is not a Trust Contract), or a GTE (provided the contract expressly states that Division 1A applies), requires the head contractor to give the principal a written 'Claim Statement' in an approved form. This covers both statutory payment claims under the SOP Act and contractual claims. The principal may request any further information reasonably required to assess whether to withhold payment (s27C(5)). A claim is not invalid merely because no Claim Statement is given (s27C(6)); however, an approved form may require information to be verified by statutory declaration or accompanied by documents, failing which it is taken not to be given (s114(5)). The Claim Statement must confirm:

• the payment status of every subcontractor engaged in connection with the contract
• for any subcontractor that remains unpaid, the subcontractor's name, the amount outstanding, details of the unpaid claim, and the reasons for non-payment.

Division 1A does not apply to contracts entered into before it commences (s120D(2)).

Details of unpaid subcontractors are not required where the head contractor has entered a written settlement for a lesser amount and the agreed amount has been paid, or where the full amount will be paid from the current claim.

When parties don’t comply

Where Claim Statement requirements apply, a principal has a discretionary power to withhold payment where a Claim Statement or further information has not been given as required, including by the applicable date, or where the principal reasonably believes that the statement or further information is false or misleading in a material particular, does not comply with Division 1A, or the head contractor has not complied (or, if paid, will not comply) with Part 4 trust obligations (s27D(1)). The principal must, as soon as reasonably practicable, give the head contractor written notice stating the claim, amount withheld and reason (s27D(2)-(3)).

While an amount is withheld, Part 2 Division 2 and Part 3 Divisions 1and 2 of the SOP Act do not apply to that amount (s27D(4)). The head contractor must not suspend work or supply, exercise the s64 lien over unfixed plant or materials, or take any action arising from or connected with non-payment. The right to withhold prevails over anything to the contrary in the contract or any other contract or agreement (s27E).

An adjudication application is deemed withdrawn only if it was made before the withholding and has not been finally determined (s27F). The claimant remains liable for adjudicator's fees and expenses already incurred and forfeits the application fee, but may make a new application once the withholding ceases. Once the grounds for withholding cease, the principal must pay as soon as reasonably practicable and give written notice of the intention to pay and the payment date (s27G). Head contractors and first-tier subcontractors will therefore need rigorous records and timely Claim Statements; non-compliance creates a serious commercial risk.

Once the relevant provisions commence, statutory immunity will apply to 'protected parties', including the State, Ministers, State Agencies, GTEs, their employees and persons acting under their direction, including agents, contractors and advisers. The immunity covers the enactment, commencement and operation of s14(3), Division 1A and Part 4, good-faith compliance and other good-faith acts or omissions in performing functions under those provisions or in connection with a construction trust, and the exercise of any right under those provisions (s112A).

Other changes

Same-day payment exception for State Agencies

The Amendment Act will create a targeted exception to the general prohibition on pay-when-paid clauses. Where a State Agency principal or head contractor is a party to the contract, the contract may require each tier to pay amounts owing on the same day payment is received. It also validates provisions in that contract or another construction contract that facilitate or give effect to that same-day payment obligation (s14(3)). Unlike traditional pay-when-paid clauses, this mechanism aligns payment obligations so that funds flow through to subcontractors as quickly as possible. It applies to contracts of any value, not only Trust Contracts, extends to contracts entered into before commencement (s120D(1)), and does not extend to GTEs.

Adjudication service deadlines

Once section 8 of the Amendment Act commences, the Amendment Act will remove the one-business-day deadline for serving adjudication and adjudication review documents. The obligation to give copies remains, but late service will not invalidate the application or response. The Amendment Act also preserves pre-commencement determinations from being quashed for non-compliance with the former one-business-day rules and protects undetermined pending applications (s120E). Adjudication review determinations must state the adjudication fees and expenses and the proportion payable by each party (s50(5)(fa)).

Building Services (Registration) Act changes

The Building Services Board may take into account events or matters occurring after an application for registration or renewal when deciding it (ss17(3), 18(3) of the Building Services (Registration) Act 2011).

Get in touch

The Amendment Act represents the most significant reform to WA's security of payment framework since the SOP Act commenced in 2022. The shift from PBAs to statutory construction trusts, combined with the new Claim Statement regime and expanded withholding powers, will change how every participant in the government construction supply chain manages payments, compliance and risk as those provisions commence. If you'd like to discuss how these reforms affect your contracts, compliance systems or negotiating position on current and future projects, get in touch with our team.