You finished the job. The subcontractor who engaged you has been paid by the head contractor. But your invoice sits unpaid, and the excuses keep coming.
You have clear legal rights. Most subbies don’t know what those rights are or how to enforce them without spending thousands on a lawyer. This guide walks you through your recovery options when a subcontractor doesn’t pay you in Australia.
Why subcontractors don’t pay (and why it doesn’t matter)
Common excuses include:
- “The head contractor hasn’t paid me yet”
- “There’s a defect we need you to fix first”
- “We’re waiting on the client to release funds”
- “Cash flow is tight this month”
Unless your contract explicitly makes payment conditional on the head contractor paying them, the subcontractor owes you the money regardless of their cash flow position. Under Australian contract law, payment is due on the terms agreed — whether that’s 7 days, 14 days, 30 days, or on completion.
Your rights under security of payment legislation
Every Australian state and territory has security of payment laws designed to keep money flowing down the construction payment chain. These laws give you a statutory right to payment, even when the contract says otherwise.
Key legislation by state:
- NSW: Building and Construction Industry Security of Payment Act 1999
- VIC: Building and Construction Industry Security of Payment Act 2002
- QLD: Building Industry Fairness (Security of Payment) Act 2017
- WA: Construction Contracts Act 2004
- SA: Building and Construction Industry Security of Payment Act 2009
- TAS: Building and Construction Industry (Security of Payment) Act 2009
- ACT: Building and Construction Industry (Security of Payment) Act 2009
- NT: Construction Contracts (Security of Payments) Act 2004
What these laws give you
- The right to a progress payment — you can claim payment for work completed, even if the contract tries to prevent it
- A fast adjudication process — disputes are typically resolved in 10–20 business days
- Statutory interest — you can claim interest on late payments
- Protection from unfair contract terms — clauses that try to exclude these rights are usually void
How to make a payment claim
To activate your security of payment rights, you must serve a payment claim that complies with the legislation in your state. This is a formal document (not just your tax invoice) that:
- States it is a payment claim under the relevant Act
- Identifies the construction work or services
- States the amount claimed
- Provides sufficient detail to identify the basis of the claim
- Is served within the timeframe allowed under your contract or the Act
If the subcontractor doesn’t pay or respond within the statutory timeframe (typically 10–15 business days), you can apply for adjudication — a binding determination by an independent adjudicator.
Important limitation: Security of payment rights only apply to construction work as defined in the legislation. If you’re a consultant, designer, or providing non-construction services, you may not be covered.
The Letter of Demand pathway
If your work doesn’t fall under security of payment legislation — or you prefer a simpler, lower-cost approach first — a Letter of Demand is the standard first step.
A Letter of Demand is a formal written notice that:
- States the amount owed
- References the contract, invoice, or agreement
- Cites the applicable law
- Gives a clear deadline (typically 7–14 days)
- States the consequences of non-payment
Why it works
Most subcontractors pay after receiving a properly drafted Letter of Demand because it shows you’re serious, creates a paper trail for tribunal or court, puts them on notice that you know your rights, and often triggers them to prioritise your invoice over others.
ClaimDone’s Proprietary AI Engine reads your contract, invoices, and correspondence, then drafts a Letter of Demand citing the applicable Australian law. The letter is automatically sent to the subcontractor via email and registered post, giving you a complete evidence trail. Flat fee: $79. Delivered in under 60 minutes.
When to escalate to tribunal
If the subcontractor ignores your Letter of Demand, your next step is typically the relevant state tribunal:
- NSW: NSW Civil and Administrative Tribunal (NCAT)
- VIC: Victorian Civil and Administrative Tribunal (VCAT)
- QLD: Queensland Civil and Administrative Tribunal (QCAT)
- WA: Magistrates Court (small claims under $10,000)
- SA: South Australian Civil and Administrative Tribunal (SACAT)
- TAS: Magistrates Court (Civil Division)
- ACT: ACT Civil and Administrative Tribunal (ACAT)
- NT: Local Court
Tribunal limits vary by state, but most handle claims up to $25,000–$100,000. The process is designed to be accessible without a lawyer, though you can engage one if you choose.
What you need to file
- Completed application form (available on the tribunal website)
- Copy of your Letter of Demand
- Copy of the contract or agreement
- Copy of all invoices
- Evidence of work completed (photos, timesheets, delivery dockets, emails)
- Proof of service of the Letter of Demand
- Filing fee (typically $50–$300 depending on claim value)
ClaimDone can prepare your tribunal application documents, including the statement of claim and witness statement, based on the evidence you upload.
What about retention money?
If the subcontractor is withholding retention money (a percentage held back until defects are fixed or the defects liability period ends), you have additional rights under security of payment legislation.
In most states, retention money must be held in a separate trust account or secured by a retention bond or bank guarantee. If the subcontractor has been paid their retention by the head contractor, they must release yours — subject to any genuine defect claims.
Common issue: Many subcontractors treat retention as a general slush fund. This is unlawful in most states. If they refuse to release retention after the agreed period, a Letter of Demand citing the security of payment Act is typically effective.
What if the subcontractor goes broke?
If the subcontractor enters administration or liquidation, your options narrow significantly. You become an unsecured creditor and will likely receive cents in the dollar, if anything.
Steps to take immediately:
- Lodge a proof of debt with the administrator or liquidator
- Check if the head contractor has paid the subcontractor for your work — if not, you may have a right to claim directly from the head contractor under trust provisions in some states
- Consider whether the subcontractor has any assets you can pursue
- Speak to a construction lawyer about your specific rights
Prevention: Always check the subcontractor’s financial position before starting work. Search the ASIC register for any winding-up notices or external administrators.
How ClaimDone helps subcontractors recover unpaid fees
ClaimDone is built for this situation. You don’t need to understand the legislation or draft formal documents yourself.
Here’s how it works:
- Tell us what happened — complete a 5-minute intake form about the job, the subcontractor, and the amount owed
- Upload your evidence — contract, invoices, emails, photos, timesheets
- Our AI drafts your Letter of Demand — citing the applicable security of payment Act, contract law, or Australian Consumer Law
- We send it automatically — email and registered post, creating a complete evidence trail
- If they don’t pay, we prepare your tribunal documents — statement of claim, witness statement, and supporting evidence bundle
Flat fees. No subscription. Done in under 60 minutes.
ClaimDone does not provide legal advice. For complex, high-value, or disputed claims, consult a construction lawyer or quantity surveyor.
FAQ
Can I use security of payment laws if I’m a sole trader subcontractor?
Yes. Security of payment legislation applies to individuals, sole traders, partnerships, and companies — as long as you’re performing construction work as defined in the relevant Act. The law protects you regardless of your business structure.
How long do I have to make a payment claim under security of payment laws?
The timeframe depends on your state and your contract. In most states, you must serve a payment claim within 12 months of completing the work, or within the timeframe specified in your contract. Check the specific Act in your state for precise deadlines.
What if the subcontractor claims there’s a defect and refuses to pay?
They can withhold a reasonable amount to cover the cost of rectifying genuine defects, but they cannot withhold the entire payment unless the defect makes the work completely worthless. If the defect claim is disputed, you can apply for adjudication under security of payment laws or file a tribunal application.
Do I need a written contract to recover money from a subcontractor?
No. Verbal contracts are legally binding in Australia. However, a written contract makes it much easier to prove the agreed terms, scope of work, and payment schedule. If you don’t have a written contract, gather all evidence of the agreement — emails, text messages, quotes, and invoices.
Can I claim interest on the unpaid amount?
Yes. Under security of payment legislation, you can claim statutory interest on late payments. If you’re pursuing the debt under common law, you can typically claim interest under state-based penalty interest legislation, usually at 6–10% per year.
Start your recovery today
When a subcontractor doesn’t pay you, waiting makes recovery harder — especially if they go broke or the evidence trail goes cold.
Start with a Letter of Demand. If that doesn’t work, escalate to tribunal. And if the amount is significant or the dispute is complex, get proper legal advice early.
ClaimDone’s AI-generated Letter of Demand service is the fastest, most cost-effective way to start the recovery process. Upload your evidence, and we’ll draft and send your Letter of Demand in under 60 minutes for a flat $79 fee.
Frequently Asked Questions
Can I use security of payment laws if I'm a sole trader subcontractor?
Yes. Security of payment legislation applies to individuals, sole traders, partnerships, and companies — as long as you’re performing construction work as defined in the relevant Act. The law protects you regardless of your business structure.
How long do I have to make a payment claim under security of payment laws?
The timeframe depends on your state and your contract. In most states, you must serve a payment claim within 12 months of completing the work, or within the timeframe specified in your contract. Check the specific Act in your state for precise deadlines.
What if the subcontractor claims there's a defect and refuses to pay?
They can withhold a reasonable amount to cover the cost of rectifying genuine defects, but they cannot withhold the entire payment unless the defect makes the work completely worthless. If the defect claim is disputed, you can apply for adjudication under security of payment laws or file a tribunal application.
Do I need a written contract to recover money from a subcontractor?
No. Verbal contracts are legally binding in Australia. However, a written contract makes it much easier to prove the agreed terms, scope of work, and payment schedule. If you don’t have a written contract, gather all evidence of the agreement — emails, text messages, quotes, and invoices.
Can I claim interest on the unpaid amount?
Yes. Under security of payment legislation, you can claim statutory interest on late payments. If you’re pursuing the debt under common law, you can typically claim interest under state-based penalty interest legislation, usually at 6–10% per year.
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