Progress Payment Claim

What Is a Progress Payment Claim?

A progress payment claim is a formal request for payment used in the Australian construction and trade industries. Unlike a standard invoice for simple goods or one-off services, a progress payment claim certifies that a specific stage of a project has been finished. It acts as both a bill and a formal statement that a milestone has been reached.

In Australia, these documents are legally distinct from ordinary invoices. Under various state Security of Payment laws, a correctly drafted progress payment claim is often referred to as a "Payment Claim." This status gives the claimant specific statutory rights. If the document is missing required details, you may lose your right to recover the debt, charge interest, or suspend work.

This type of claim is essential for managing cash flow. Large projects like building a new home or a commercial fit-out are rarely paid for upfront. Instead, the contract breaks the project down into stages or values. You complete a portion of the work, submit a claim, and get paid for that portion. This cycle continues until the project is finished.

When to Use This Document

You should use a progress payment claim whenever you are working under a contract that specifies payments based on milestones, stages, or monthly progress. This applies to most residential and commercial building work.

Common scenarios include:

• Residential Building Contracts: If you are a builder working under an HIA or Master Builders contract, you will typically have a fixed price contract with progress payments tied to stages like the "Base Stage," "Frame Stage," "Lock-up," and "Practical Completion."
• Commercial Construction Contracts: In the commercial sector, such as those using standard forms like AS 4000 or AS 2124, claims are usually made monthly based on the value of work done rather than fixed stages.
• Trade Subcontractors: Electricians, plumbers, and concreters working for a head contractor will need to submit these claims monthly to get paid for their labour and materials.
• Specified Milestones: Any time a contract states that payment is due upon reaching a specific percentage of completion or a physical event, you must use a progress claim to trigger that payment.

It is important not to confuse this with a simple invoice. An invoice implies the goods or service are already delivered and accepted. A progress claim asserts that the work is done and requests payment according to the contract terms.

Key Sections and Required Elements

A valid progress payment claim must contain specific information to comply with Australian tax laws and state security of payment legislation. Missing these elements can result in payment delays or invalid claims.

Header & Project Identification

This section links the claim to the correct job. You must include the Project Name and Site Address. This is vital for clients managing multiple sites. You also need the Contract Reference Number, which connects the claim to the legal agreement. Include the Reference Date, which is the date the claim is made. This date is legally significant because it starts the clock for the client to respond. Finally, label it clearly with a Claim Number, such as "Claim #3 of 5," to track the sequence of payments.

Description of Work Completed

You must clearly identify the construction work or related goods and services. Under laws like the Building and Construction Industry Security of Payment Act 1999 (NSW), the claim must specifically identify the work or the related goods and services to which the payment relates. You should state the current milestone, such as "Frame Stage - 100% Complete." If you are claiming for a percentage of work, provide a brief narrative describing what has been achieved.

Variations

If you have performed extra work outside the original contract scope, list this separately. This is known as a variation. You should only claim for variations that have been formally approved. Including unapproved changes can lead to disputes and delay the entire payment.

Financial Calculation

This section details the math behind the claim. It must show the Value of Work Done this period. You must also list the Previously Claimed amounts to show the total value of the project to date. Adjustments should be clearly marked. In commercial contracts, this often includes Retention Money, usually 5%, which the principal holds back until practical completion. Finally, you must state the GST amount and the Total Amount Due.

If the total amount is over $1,000, the document must meet ATO criteria for a Tax Invoice. This means it must include your ABN, state "Tax Invoice" clearly, and show the GST amount separately.

Mandatory Endorsements

Depending on the state and the value of the project, you may need a specific statement. In Queensland, for projects over $1 million, the Building Industry Fairness (Security of Payment) Act 2017 (QLD) requires a mandatory endorsement stating the claim is made under the Act.

How to Write a Progress Payment Claim (Step by Step)

Writing a progress payment claim requires attention to detail. Follow these steps to ensure your document is professional, compliant, and gets paid on time.

Step 1: Verify the Reference Date

Before you start typing, check your contract. Most standard contracts define "Reference Dates." You can only make a claim on these specific dates. Sending a claim early can invalidate it. For example, if your contract allows monthly claims on the 25th of the month, ensure your claim date matches this.

Step 2: Confirm the Milestone or Progress

Physically inspect the site. Do not claim for work that is not complete. For example, do not claim for the "Lock-up Stage" if the doors are not yet hung. Under standard contracts like AS 4000, claiming for incomplete work is a breach of contract and grounds for rejection. Ensure the work is "substantially complete" to the standard required by the contract.

Step 3: Calculate the Claim Amount

Review your Schedule of Values or the contract price list. Calculate the amount for the specific stage or the percentage of work completed. If you are a subcontractor, check the head contractor's "Pay Less" notice culture. They will likely assess your claim against their own standards, so be realistic.

Subtract any retention money if the contract requires it. Calculate the GST component. Ensure the total is accurate.

Step 4: Draft the Description

Write a clear description of the work. Avoid vague terms like "general building work." Be specific. "Installation of framing to first floor level in accordance with drawing A2" is much better. This satisfies the legal requirement to identify the construction work.

Step 5: Attach Supporting Documents

Never send a claim in isolation. Attach supporting evidence such as progress photos, signed variation orders, or inspection certificates. This helps the client verify the claim quickly and reduces the likelihood of a dispute.

Step 6: Perform a Compliance Check

Review the document against your state laws.

• New South Wales: Ensure the work is identified clearly as per the Building and Construction Industry Security of Payment Act 1999.
• Queensland: Add the required endorsement if the project value is over the threshold.
• Western Australia: The Construction Contracts Act 2004 (WA) mandates the claim be in writing and identify the amount claimed and work done.
• South Australia: If this is domestic building work, ensure you are using the correct form format as per the Building Work Contractors Act 1995 (SA).

Step 7: Send to the Correct Recipient

Check the contract clauses regarding notices. The claim must be served correctly, often by email to a specific address or by post. Sending it to the wrong person may not count as valid service.

Common Mistakes to Avoid

Avoiding these common errors will save you time and protect your cash flow.

Claiming Too Early

One of the biggest mistakes is "front-ending" the claim. This happens when a builder invoices for a stage before it is physically finished. Clients and superintendents will reject this immediately. It can also damage your professional relationship. Wait until the stage is genuinely done before submitting the claim.

Missing the Reference Date

Many tradies send claims whenever they need cash, rather than adhering to the contract schedule. Under Security of Payment Acts in NSW, VIC, and other states, a claim is only valid if made on a Reference Date. Missing this window means you miss your payment cycle for that month.

Including Unapproved Variations

Do not sneak extra costs into the main claim. If you moved a power point and the client hasn't signed a Variation Order, do not include it in the progress claim. If you do, the client may dispute the entire invoice, delaying payment for the work you actually agreed to do. Submit variations separately.

Incorrect ABN or GST Details

This is a simple administrative error that causes major headaches. Ensure your ABN is correct. If you are not registered for GST, do not claim it. The ATO is strict about Tax Invoice requirements. If your claim is over $1,000 and does not meet tax invoice criteria, the client cannot legally claim the GST credit, and they may refuse to pay.

Labelling Claims Incorrectly

Be careful with the language you use. Avoid writing "Without Prejudice" on a progress claim unless you are specifically trying to settle a dispute. A progress claim is an interim account. If you label it as "Full and Final Settlement" when it is not, you might accidentally waive your rights to claim for defects or unpaid variations later.

Legal Considerations (AU)

Operating in the Australian construction industry requires a solid understanding of the legal framework surrounding payments.

Security of Payment Acts (SOPA)

Every state and territory in Australia has legislation designed to ensure cash flow in the construction industry. These are collectively known as Security of Payment Acts.

In NSW, the Act is strict. If a client does not respond within the timeframe (usually 10 to 15 business days) with a Payment Schedule, they become liable for the full amount claimed. A Payment Schedule is a document that tells you how much they will pay and why. If they pay nothing or stay silent, you have the right to apply for adjudication. Adjudication is a fast-track legal process to resolve payment disputes.

If your claim does not comply with the Act, for example by failing to identify the work, you lose these statutory rights.

Unfair Contract Terms

The Competition and Consumer Act 2010 (Cth) protects small businesses. If your client is a small business (fewer than 20 employees and contract value under $5 million or $3 million depending on the timeframe), be aware of unfair contract terms. A term that allows the client to unilaterally vary the progress payment amounts without your consent may be void. This offers some protection if a client tries to change the rules halfway through a job.

Retention Money

In commercial contracts, clients often hold back Retention. This is security money to ensure you finish the job and fix defects. Standard practice is 5%. Your progress claim should calculate this deduction. Instead of claiming $10,000 for the work, you might claim $9,500 and note that $500 is being held as retention. Ensure your contract clearly states when this money is released, usually at Practical Completion.

Tax and ASIC Compliance

Always remember your obligations to the ATO. The money you receive from progress claims is income. Ensure you are setting aside money for tax. If you are operating through a company, ensure your Director ID and company details are up to date with ASIC.

State Specific Nuances

• Victoria: The Building Industry Fairness (Security of Payment) Act 2017 sets out specific requirements for payment claims and responses.
• Western Australia: The laws are slightly different, and the mechanisms for adjudication vary. Always check the Construction Contracts Act 2004 (WA).
• South Australia: For domestic building work, the Building Work Contractors Act 1995 (SA) restricts progress payments to specific stages and limits the deposit you can take.

Frequently Asked Questions

What happens if the client does not pay on time?

If the client ignores your claim, you should review the Security of Payment laws in your state. Generally, if they do not provide a valid Payment Schedule within the strict timeframe, they may lose the right to dispute the claim. You can then initiate adjudication or, in some commercial cases, suspend work.

Can I claim for materials delivered to the site but not yet installed?

This depends on your contract. Some contracts allow you to claim for materials on-site. Others do not allow you to claim for materials until they are incorporated into the works. Check your specific contract terms regarding "Off-site materials" or "Materials on Site."

Is a Progress Payment Claim the same as a Tax Invoice?

Yes, if it meets the ATO criteria. For amounts over $1,000, a progress payment claim must act as a Tax Invoice. It must include your business name, ABN, the words "Tax Invoice," the date, and a brief description of the items supplied.

How often can I submit a claim?

This is dictated by your contract. Residential contracts usually tie payments to physical stages (e.g., 5 stages). Commercial contracts usually allow monthly claims. You cannot claim outside of these intervals unless the contract is varied.

Do I need a lawyer to write a Progress Payment Claim?

Generally, no. For routine claims, you can use a standard template. However, if the claim is complex, involves large variations, or is part of a dispute, seeking legal advice from a construction lawyer is highly recommended.

What is a "Payment Schedule"?

A Payment Schedule is the response you receive from the client or head contractor. It is not a payment. It is a document stating how much they intend to pay and why. If they intend to pay less than the claimed amount, they must provide reasons, such as "defective work" or "work not yet done." You should carefully review this document to ensure their reasons are valid.