Subcontractor Didn’t Get Paid: How to Recover Money from a Head Contractor

You finished the job. You sent the invoice. The head contractor hasn’t paid. This is one of the most common disputes in Australian construction.

Australian law gives subcontractors powerful tools to recover unpaid money fast. This guide explains your rights under security of payment legislation, trust account protections, and the practical steps to get paid without going to court.

Why head contractors don’t pay

Head contractors delay or withhold payment for several reasons:

• Cash flow problems — the builder is waiting on the client to pay
• Disputes over quality — alleged defects or incomplete work, often exaggerated
• Set-off claims — the contractor deducts amounts for alleged breaches or delays
• Insolvency — the head contractor cannot pay anyone
• Administrative delays — payment claims not processed, lost invoices, disorganised systems
• Bad faith — deliberate delay or refusal to pay, hoping you give up

Whatever the reason, you have legal rights.

Security of payment legislation in each state

Every Australian state and territory has security of payment laws designed to keep money flowing through construction projects. These laws give subcontractors the right to fast adjudication without going to court.

New South Wales — Building and Construction Industry Security of Payment Act 1999 Victoria — Building and Construction Industry Security of Payment Act 2002 Queensland — Building Industry Fairness (Security of Payment) Act 2017 South Australia — Building and Construction Industry Security of Payment Act 2009 Western Australia — Construction Contracts Act 2004 Tasmania — Building and Construction Industry (Security of Payment) Act 2009 Australian Capital Territory — Building and Construction Industry (Security of Payment) Act 2009 Northern Territory — Construction Contracts (Security of Payments) Act 2004

These Acts typically allow you to:

• Serve a payment claim on the head contractor
• If they don’t pay or respond properly, apply for adjudication
• Get a binding determination within 10–15 business days
• Enforce the adjudication as a court judgment if needed

Security of payment adjudication is faster and cheaper than court. It focuses on whether payment is due now, not whether the work was perfect.

Trust account protections for subcontractors

Some states require head contractors to hold retention money or project funds in statutory trust accounts. If your money is sitting in a trust, you typically have priority over general creditors if the contractor goes broke.

Queensland — Project Trust Accounts under the BIFA Act are mandatory for contracts over $1 million. Subcontractors are beneficiaries and can trace funds even if the head contractor becomes insolvent.

New South Wales — Retention money must be held in a trust account under the Security of Payment Act. If the contractor fails to do this, you can claim the retention amount directly.

Victoria — No statutory trust scheme, but retention money held on trust under common law principles may still be protected.

Other states — Trust protections vary. Check your contract and state legislation.

If you suspect your money is in a trust account, act fast. Once the contractor is wound up, tracing trust funds becomes harder.

Check your contract and payment terms

Before you send a demand, review:

• Payment terms — when is payment due? Net 30? 14 days after claim?
• Payment claim requirements — does the contract specify a format or supporting documents?
• Dispute resolution clauses — does the contract require notice before legal action?
• Set-off rights — can the contractor deduct disputed amounts, or must they pay first and dispute later?

Most construction contracts incorporate the security of payment legislation by reference. Even if your contract says otherwise, the statutory payment claim process typically overrides unfair contract terms.

Serve a formal payment claim

Under security of payment laws, a payment claim is a written demand for payment that triggers strict timeframes.

Your payment claim must:

• Identify the construction work or services provided
• State the amount claimed
• Refer to the contract or purchase order if applicable
• Be served on the head contractor in accordance with the contract or Act

The head contractor then has a limited time (typically 10–20 business days depending on the state) to serve a payment schedule. If they don’t respond, they lose the right to dispute the claim and must pay the full amount.

If they do respond but don’t pay, you can apply for adjudication.

Send a letter of demand

A letter of demand is not the same as a payment claim under the security of payment Acts, but it serves an important commercial purpose: it shows you are serious, creates a paper trail, and often prompts payment without adjudication.

Your letter of demand should:

• State the unpaid amount, invoice numbers, and dates
• Refer to the contract and payment terms
• Cite the applicable security of payment legislation
• Warn that you will apply for adjudication or commence legal proceedings if payment is not received within 7 days
• Be sent by email and registered post to the head contractor’s registered address

Many head contractors pay up after receiving a properly drafted demand letter, especially if they know you understand your rights.

Apply for adjudication if the contractor doesn’t pay

If the head contractor ignores your payment claim or serves a payment schedule but doesn’t pay, you can apply for adjudication. The process typically involves:

1. Lodge an adjudication application with an authorised nominating authority (each state has a list of approved adjudicators)
2. Pay the application fee (typically $1,500–$3,000, recoverable if you win)
3. The adjudicator is appointed within 5 business days
4. Both parties submit written arguments and evidence
5. The adjudicator makes a determination within 10–15 business days
6. The determination is binding and enforceable as a court judgment

Adjudication focuses on cash flow, not final rights. Most subcontractors who follow the process correctly win.

Enforce the adjudication determination

If you win the adjudication and the contractor still doesn’t pay, you can:

• File the determination as a judgment in the relevant court
• Instruct a sheriff or bailiff to seize assets
• Issue a bankruptcy notice if the debtor is an individual or statutory demand if the debtor is a company
• Apply for a winding-up order if the company is insolvent

Enforcement is a separate process, but the adjudication determination gives you a legal basis to act.

What if the head contractor is insolvent?

If the head contractor has entered administration or liquidation, your options change:

• Prove your debt — lodge a proof of debt with the liquidator
• Claim trust funds — if your money is in a statutory trust account (Queensland, NSW), you may have priority
• Personal guarantees — if the director gave a personal guarantee, pursue them directly
• Unfair preference claims — be aware that if you were paid in the 6 months before insolvency, the liquidator may try to claw back the payment

Insolvency is complex. If the debt is large or the contractor is in liquidation, speak to a lawyer who specialises in construction insolvency.

Common mistakes subcontractors make

Not serving a valid payment claim — if your claim doesn’t comply with the Act, the adjudicator will reject it.

Missing the deadline — security of payment timeframes are strict. Miss a deadline and you lose your rights for that claim period.

Continuing to work without payment — do not keep working if you’re not being paid. Stop work, secure the site, and demand payment.

Failing to keep records — keep copies of all invoices, emails, payment claims, and delivery dockets. You will need them for adjudication.

Not acting fast enough — if the contractor is going broke, every day counts. The longer you wait, the less money is left.

How ClaimDone helps subcontractors recover unpaid money

ClaimDone generates a professionally formatted letter of demand citing the applicable security of payment legislation and your contract terms. You upload your invoices and evidence, and our Proprietary AI Engine drafts the letter in plain, direct language — then sends it automatically to the head contractor.

A well-drafted demand letter often prompts payment without the need for adjudication or court. If the contractor ignores the letter, you have a clear paper trail to support your next steps.

What you get:

• AI-drafted letter citing NSW, VIC, QLD, or other state security of payment laws
• Delivered automatically by email and registered post
• Fixed fee of $79, no subscription, done in 60 minutes

ClaimDone is not a law firm and does not provide legal advice. We generate legal-style documents based on the evidence you upload.

When to get a lawyer

You should speak to a construction lawyer if:

• The debt is over $50,000
• The head contractor is disputing the quality of your work
• The contractor has entered administration or liquidation
• You need to apply for adjudication and are not confident doing it yourself
• The contractor is threatening to sue you for defects or delays

For straightforward unpaid invoices under $50,000 where the work is not disputed, a letter of demand and adjudication application are usually enough.

Final checklist: Recovering unpaid subcontractor money

• [ ] Review your contract and payment terms
• [ ] Serve a formal payment claim under the security of payment Act
• [ ] Send a letter of demand to the head contractor
• [ ] If no response, apply for adjudication within the statutory timeframe
• [ ] Enforce the adjudication determination if you win
• [ ] If the contractor is insolvent, lodge a proof of debt and claim trust funds if applicable

The longer you delay, the harder it becomes to recover your money. If you need to generate a letter of demand for unpaid invoices, ClaimDone can prepare and send it in under an hour for a flat fee of $79.

Frequently Asked Questions

Can I stop work if the head contractor hasn't paid me?

Yes. Most security of payment laws allow you to suspend work if a payment claim is overdue. Check your contract and the relevant state Act for notice requirements. Do not abandon the site — formally notify the contractor in writing that you are suspending work due to non-payment.

How long does adjudication take?

Adjudication is fast. Once you lodge your application, the adjudicator is typically appointed within 5 business days and must make a determination within 10–15 business days (timeframes vary slightly by state). The entire process usually takes 3–4 weeks from application to determination.

What if the head contractor disputes the quality of my work?

Security of payment adjudication focuses on whether payment is due now, not whether the work was perfect. The contractor can raise quality disputes, but they must still pay unless they served a valid payment schedule. Quality disputes can be resolved later in court or tribunal if needed.

Can I claim interest on the unpaid amount?

Yes. Your contract may specify an interest rate for late payment. If not, you can typically claim interest under the relevant state security of payment Act or the common law. Interest rates are typically 10–12% per annum. Include the interest calculation in your payment claim and demand letter.

What happens if the head contractor is a sole trader or partnership, not a company?

Security of payment laws apply to individuals, partnerships, and companies. The process is the same. If the debtor is an individual and doesn’t pay after adjudication, you can issue a bankruptcy notice. If they are a partnership, you can pursue the partners personally.