Construction Subcontractor Agreement (Australia)
A Subcontract Agreement is the document a head contractor and trade subcontractor sign for a construction project. The Australian construction industry is governed by the Security of Payment Acts of each State and Territory — which prescribe statutory rights to make a payment claim, apply for adjudication, and enforce an adjudicator's determination. Our free template is state-aware (selecting the correct Act and adjudication body for NSW / Vic / Qld / WA / SA / Tas / ACT / NT) and current to the major Victorian reforms commencing on 15 April 2026 under the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025.
ACN 189 472 638
Builder Licence: NSW Builder Licence 132749C
ACN 628 491 752
ABN 52 628 491 752
Trade Licence: NSW Electrical Contractor Licence 248917C
1.1 Project: Pacific Highway Office Tower Refurbishment at 88 Pacific Highway, Chatswood NSW 2067.
1.2 Head Contract Reference: Head Contract HC-2026-0042 between the Principal and Mitchell Construction Pty Ltd between the Head Contractor and Chatswood Commercial Investments Pty Ltd.
1.3 Subcontract Scope: Supply, install, test, and commission all electrical works for the Pacific Highway Office Tower Refurbishment, including: switchboards, distribution boards, lighting installation, power outlets, data and communications cabling, emergency lighting and exit signage, fire-detection wiring to FCP, and certification of all electrical works in accordance with AS/NZS 3000:2018 and the NSW Service and Installation Rules.
1.4 Contract Price: AUD 485,000.00 (fixed lump sum), excluding GST. The Head Contractor shall pay the Subcontractor in accordance with clause 3 (Payment).
1.5 Programme: The Subcontractor shall commence the Subcontract Works on or before 1 July 2026 and shall achieve practical completion by 15 December 2026, subject to extensions of time properly granted under this Subcontract.
3.1 Payment terms: The Head Contractor shall pay the Subcontractor within 15 business days of receipt of a valid payment claim, subject to any payment schedule issued under the applicable Security of Payment legislation.
3.2 Security of Payment Act: This Subcontract is subject to the Building and Construction Industry Security of Payment Act 1999 (NSW). Under that Act: 10 business days for the head contractor to provide a payment schedule; payment due within 15 business days of the payment claim for subcontracts. The Subcontractor may serve a payment claim on the Head Contractor at any time during the contract; the Head Contractor may respond with a payment schedule, after which the Subcontractor may apply for adjudication if the payment schedule is less than the payment claim. Adjudication is administered by Adjudicate Today, ABC Dispute Resolution, RICS Australasia (authorised nominating authorities).
3.3 Retention: The Head Contractor may withhold a retention of 5% of each progress payment. Retention monies are released as follows: Half (2.5%) on practical completion of the Subcontract Works; the balance (2.5%) at the end of the 12-month defects-liability period from practical completion.
3.4 Goods and Services Tax: All amounts are exclusive of GST. The Subcontractor shall issue a Tax Invoice in respect of each payment claim that complies with the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
The Subcontractor shall, at the Subcontractor's own cost, hold and maintain the following insurances throughout the period of this Subcontract and the defects-liability period:
Public Liability — AUD 20 million per claim with run-off cover; Workers Compensation as required by the Workers Compensation Act 1987 (NSW); Tools / Plant in Care, Custody, and Control — AUD 250,000; Professional Indemnity — AUD 2 million per claim and in aggregate.
The Subcontractor shall, on request, provide the Head Contractor with current Certificates of Currency for each policy. The Subcontractor shall ensure that all employees, agents, and sub-subcontractors of the Subcontractor are covered by the appropriate workers compensation insurance in accordance with the State Workers Compensation Act (e.g., Workers Compensation Act 1987 (NSW), Workplace Injury Rehabilitation and Compensation Act 2013 (Vic), Workers' Compensation and Rehabilitation Act 2003 (Qld), or equivalent in other States).
5.1 Termination for default: Either party may terminate this Subcontract on 14 days' written notice for material breach not remedied within the notice period. Without prejudice to this right, the Head Contractor may terminate immediately for: (a) insolvency of the Subcontractor; (b) abandonment of the Subcontract Works; or (c) any other event specified in any applicable industrial agreement.
5.2 Termination consequences: On termination, the Head Contractor shall pay the Subcontractor for all Subcontract Works properly performed up to the date of termination, less any costs of completion / damages / liquidated damages incurred by the Head Contractor. The Subcontractor shall hand over all materials, drawings, and documents relating to the Subcontract.
5.3 Governing law: This Subcontract shall be governed by and construed in accordance with the laws of the State of New South Wales, Australia and the laws of the Commonwealth of Australia. The parties submit to the exclusive jurisdiction of the courts of New South Wales (subject to the dispute resolution and adjudication procedures in the applicable Security of Payment Act).
The parties expressly acknowledge that this Subcontract is subject to the Building and Construction Industry Security of Payment Act 1999 (NSW). The Subcontractor's right to make a payment claim, to apply for adjudication, and to enforce an adjudicator's determination by court order or judgment is a statutory right that cannot be contracted out of (any clause purporting to exclude or limit this right is void under the Act). The payment claim shall include: (a) the words "This is a payment claim made under the [relevant SoPA Act]"; (b) identification of the construction work or related goods/services; (c) the amount claimed; (d) a breakdown showing how the amount was calculated; (e) any reasonable supporting evidence (e.g., site diary, time-sheets, photos of completed work). This enhanced format protects against challenges to the validity of the claim under the Act.
Pay-when-paid prohibited: Any clause in this Subcontract that purports to make the Head Contractor's payment obligation to the Subcontractor conditional on the Head Contractor first receiving payment from the Principal (a "pay-when-paid" clause) is void under the applicable SoPA Act. The Head Contractor's payment obligation to the Subcontractor is independent of the Head Contractor's right to be paid by the Principal.
Variations process: Any variation to the Subcontract Works shall be initiated by a written Variation Order signed by the Head Contractor's Project Manager. The Subcontractor shall submit a priced quote within 3 business days. Variation works shall not commence without written acceptance of the quote. Variations affecting the critical path entitle the Subcontractor to a reasonable extension of time.
Liquidated damages: If the Subcontractor fails to achieve practical completion by the Completion Date (as extended by any extension of time properly granted), the Subcontractor shall pay liquidated damages of AUD 2,500.00 per day, capped at AUD 25,000.00 in aggregate. The parties agree that this rate is a genuine pre-estimate of the loss likely to be suffered by the Head Contractor as a result of delay, and is not a penalty (Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205). The Head Contractor may deduct liquidated damages from any amount owing to the Subcontractor (subject to the SoPA Act).
Work Health and Safety obligations: The Subcontractor is a "person conducting a business or undertaking" (PCBU) within the meaning of the Work Health and Safety Act 2011 (Cth) (and equivalent State legislation: WHS Act 2011 (NSW/Qld/Tas/SA/ACT/NT) / Occupational Health and Safety Act 2004 (Vic) / Work Health and Safety Act 2020 (WA)). The Subcontractor owes the primary duty of care under s. 19 to its workers and to other persons in or near the workplace. The Head Contractor and the Subcontractor each have consultation, co-operation, and co-ordination duties under s. 46. The Subcontractor shall: (a) maintain a Safe Work Method Statement (SWMS) for any "high risk construction work" under reg. 291 of the WHS Regulations; (b) ensure all workers hold appropriate White Cards and high-risk-work licences; (c) report all notifiable incidents to the regulator under ss. 35-38; and (d) cooperate with the Head Contractor's site safety management plan.
Personnel Contracting test: The High Court of Australia in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (and the companion case ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2) confirmed that whether a worker is an employee or an independent contractor is determined by the terms of the written contract between the parties (not by reference to "totality of relationship" factors, save where the contract is a sham or the conduct departs from it). The parties confirm that this Subcontract correctly characterises the Subcontractor as an independent contractor and not an employee — by reference to the rights and obligations as written in this document. Each party acknowledges that this characterisation reflects the genuine commercial arrangement.
Sham contracting — Fair Work Act: Each party acknowledges Fair Work Act 2009 (Cth) ss. 357-359 (sham contracting), which prohibit an employer from misrepresenting an employment relationship as an independent-contracting relationship. Civil penalty up to 600 penalty units per contravention for the employer; reasonable mistake defence under s. 357(2) is narrow. The Head Contractor confirms that the Subcontractor is a genuine independent contractor — typically because the Subcontractor: (a) operates its own business, with its own ABN, premises, equipment, and workforce; (b) contracts with multiple principals; (c) takes commercial risk and reward; (d) is paid by reference to results, not time; (e) is not subject to detailed control over the manner of performing the work.
Closing Loopholes reforms — Fair Work Amendment (Closing Loopholes No. 2) Act 2024: The Subcontractor acknowledges the employee-like worker jurisdiction introduced by the Fair Work Amendment (Closing Loopholes No. 2) Act 2024 (Cth), commenced 26 August 2024. The Fair Work Commission now has jurisdiction to set minimum standards for "employee-like" workers in the digital platform economy and "regulated road transport contractors" — but generally not for traditional construction subcontractors operating under their own ABN with multiple principals. The Subcontractor confirms it operates an independent business and is not an "employee-like" worker within the meaning of the Closing Loopholes regime.
What Is a Subcontract Agreement?
A <strong>Subcontract Agreement</strong> is a written contract between a <strong>head contractor</strong> (the builder engaged by the Principal under the head contract) and a <strong>trade subcontractor</strong> (the specialist contractor performing a defined scope of works — electrical, plumbing, structural steel, joinery, etc.). The subcontract sits inside the head-contract structure: the head contractor remains contractually responsible to the Principal for the entire project, but flows down specific scopes of work to subcontractors who hold the relevant trade licences and insurances.
Australian construction contracts are governed by the <strong>Security of Payment Acts</strong> of each State and Territory: NSW (<em>BCISPA 1999</em>), Victoria (<em>BCISPA 2002</em> — major reforms from 15 April 2026 under the Building Legislation Amendment Act 2025), Queensland (<em>Building Industry Fairness (Security of Payment) Act 2017</em>), Western Australia (<em>Construction Contracts Act 2004</em>), South Australia (<em>BCISPA 2009</em>), Tasmania (<em>BCISPA 2009</em>), ACT (<em>BCISPA 2009</em>), and Northern Territory (<em>Construction Contracts (Security of Payments) Act 2004</em>). The SoPA Acts give every subcontractor a statutory right to make a <strong>payment claim</strong>, receive a <strong>payment schedule</strong>, and apply for <strong>adjudication</strong> if disputed — these rights cannot be contracted out of.
Two recent reforms materially affect Australian subcontracts. First, <strong>Victoria from 15 April 2026</strong> imposes a 20-business-day statutory cap on payment terms, retention monies must be held on trust, and 5-business-days' notice is required before calling on performance security. Second, the High Court in <em>CFMMEU v Personnel Contracting Pty Ltd</em> [2022] HCA 1 and <em>ZG Operations v Jamsek</em> [2022] HCA 2 confirmed that the employee-vs-independent-contractor characterisation is determined by the <strong>terms of the written contract</strong>, not by a totality-of-relationship analysis (subject to sham contracting). The <em>Fair Work Amendment (Closing Loopholes No. 2) Act 2024</em> commenced 26 August 2024 and introduced an "employee-like" jurisdiction for digital-platform and road-transport workers — but not generally for construction subcontractors.
What's Covered in This Template
Our Australian Subcontract Agreement covers every element a head contractor and subcontractor expect.
Head Contractor + Subcontractor
Full names, ACNs, addresses, builder licence (head), trade licence (sub), ABN (sub — for tax invoices).
Project Identification
Project name, site address, head-contract reference, Principal name.
Subcontract Scope of Works
Free-text description of the scope, deliverables, and relevant Australian Standards (e.g., AS/NZS 3000 for electrical, AS 3500 for plumbing).
Contract Price + Pricing Basis
Lump-sum / schedule-of-rates / cost-plus pricing, in AUD ex GST.
Programme Dates
Start date, practical completion date — with extension-of-time provision.
Payment Terms (SoPA-compliant)
15-20 business days standard. Retention percentage. Retention release schedule (typically half on PC, half after DLP).
Insurances Schedule
Public liability (typically AUD 20M), workers compensation under State Act, plant in care, professional indemnity if design role.
Security of Payment Act Reference
State-aware reference to the applicable SoPA Act, payment-schedule window, and authorised adjudication body.
Expert: SoPA Enhanced Procedure
Full payment-claim format checklist + retention-trust acknowledgement + pay-when-paid prohibition.
Expert: Variations + Liquidated Damages
Written variation order process + LD rate per day + LD cap with Andrews v ANZ (2012) 247 CLR 205 reference.
Expert: WHS Act 2011 PCBU duties
s. 19 primary duty + s. 46 consultation/cooperation/coordination + SWMS for high-risk construction work + reportable incidents.
Expert: Personnel Contracting + Closing Loopholes
[2022] HCA 1 contract-terms characterisation + FW Act ss. 357-359 sham contracting + Closing Loopholes No. 2 (26 Aug 2024) employee-like jurisdiction.
How to Create a Subcontract Agreement
Follow these steps to produce a state-aware, SoPA-compliant subcontract ready for both parties to sign.
- 1
Identify Both Contractors
Enter the Head Contractor (with ACN, address, builder licence) and the Subcontractor (with ACN, ABN, address, trade licence). Builder and trade licences are mandatory in most States for any non-trivial construction work.
- 2
Describe the Project and Subcontract Scope
Enter the project name, site address, and head-contract reference. Describe the subcontract scope with reference to the relevant Australian Standards (AS/NZS 3000 electrical, AS 3500 plumbing, AS 4100 structural steel) and any project-specific specifications.
- 3
Set Price and Programme
Enter the contract price in AUD (ex GST), the pricing basis (lump sum / schedule of rates / cost plus), the start date, and the practical completion date. Common pricing for trade subcontracts: electrical 15-20% of total project cost; plumbing 8-12%; structural steel 10-15%.
- 4
Configure Payment, Retention, and Insurances
Set payment terms (15-20 business days — capped by State SoPA Act), retention (typically 5% on progress claims with 10% cumulative cap), retention release schedule (half on PC, half after DLP). List the required insurances: public liability AUD 20M, workers compensation, plant in care, professional indemnity if design role.
- 5
Add Expert Protections
Add SoPA enhanced procedure (full payment-claim format + retention-trust if project ≥statutory threshold). Add variations process + liquidated damages rate. Add WHS Act PCBU duties acknowledgement. Add Personnel Contracting [2022] HCA 1 + sham contracting + Closing Loopholes No. 2 acknowledgement.
Legal Considerations
Construction subcontracts involve strict statutory rights that cannot be contracted out of — get the SoPA framework wrong and you may lose payment-claim and adjudication protections.
This template is for informational purposes only and does not constitute legal advice. Construction subcontracts are subject to State-specific Security of Payment Acts with strict procedural requirements — failure to follow the prescribed payment-claim and adjudication process forfeits valuable statutory rights. Builder and trade licensing requirements also vary by State. Always obtain advice from an Australian construction lawyer.
Reviewed for Australian construction law
Security of Payment Acts — State Differences Matter
Every Australian State and Territory has its own Security of Payment Act with different procedures: <strong>NSW</strong> (BCISPA 1999) — 10 business days for payment schedule, 15 business days for payment; <strong>Vic</strong> (BCISPA 2002) — reformed 15 April 2026 (20-day cap, retention trust, 5-day performance-security notice); <strong>Qld</strong> (BIF Act 2017) — Project Trust Account for state ≥AUD 1M / private ≥AUD 10M; <strong>WA</strong> (Construction Contracts Act 2004) — 14-day response window; <strong>SA / Tas / ACT</strong> (BCISPA 2009 series); <strong>NT</strong> (CCSP Act 2004). The Acts prohibit <strong>pay-when-paid</strong> clauses and <strong>contracting out</strong> of statutory rights. Compliance requires drafting that aligns to the specific State Act, not a generic template.
Retention Trust Accounts — Insolvency Protection
A major reform across Australia is the introduction of <strong>retention trust accounts</strong> — separate bank accounts holding subcontractor retention monies on trust, protected from the Head Contractor's insolvency. <strong>NSW</strong>: retention monies above AUD 20,000 on projects ≥AUD 20M must be held in a separate retention trust account under the <em>Building and Construction Industry (Retention Trust Account) Act 2015</em> (NSW). <strong>Qld</strong>: Project Trust Account regime under the BIF Act 2017 for state ≥AUD 1M / private ≥AUD 10M projects. <strong>Vic</strong>: retention trust commences 15 April 2026 under the Vic Amendment Act 2025. <strong>WA / SA / Tas / ACT / NT</strong>: no statutory retention trust regime currently in force, though under review. Head contractors operating in trust-regime jurisdictions must establish proper trust banking arrangements before withholding retention.
WHS Act 2011 — PCBU Duties on Construction Sites
The <em>Work Health and Safety Act 2011</em> (Cth) and the harmonised State Acts (NSW, Qld, Tas, SA, ACT, NT — Vic and WA have similar but not identical regimes) impose a primary duty of care on every <strong>person conducting a business or undertaking (PCBU)</strong> under <strong>s. 19</strong>. Both the Head Contractor and the Subcontractor are PCBUs. They have <strong>consultation, co-operation, and co-ordination</strong> duties under <strong>s. 46</strong> — meaning they must work together on WHS, not pass the buck. The Subcontractor must maintain a <strong>Safe Work Method Statement (SWMS)</strong> for any <em>high risk construction work</em> under reg. 291 of the WHS Regulations (working at heights, demolition, confined spaces, etc.). Notifiable incidents must be reported to the regulator under ss. 35-38. Penalties for breach: up to AUD 4.32M for Category 1 (reckless conduct), AUD 1.8M for Category 2, AUD 540k for Category 3 (FY2025-26 indexed).
Personnel Contracting and the Independent Contractor Question
In <em>Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd</em> [2022] HCA 1 (and the companion case <em>ZG Operations Australia Pty Ltd v Jamsek</em> [2022] HCA 2), the High Court of Australia confirmed that whether a worker is an <strong>employee</strong> or an <strong>independent contractor</strong> is determined by the <strong>terms of the written contract</strong> — not by a "totality of relationship" analysis that looked at conduct over time, subject to sham contracting and departure from the contract. This is a significant shift from the previous <em>Hollis v Vabu</em> (2001) 207 CLR 21 multifactor test. For construction subcontracts, the practical implications: (a) carefully draft the subcontract terms to reflect a genuine arm's-length business-to-business arrangement (own ABN, own insurances, own workforce, multiple principals, paid by results); (b) avoid clauses that look like employment (set hours, exclusive provision, integration into the head contractor's business); (c) acknowledge the FW Act ss. 357-359 <em>sham contracting</em> regime. The <em>Fair Work Amendment (Closing Loopholes No. 2) Act 2024</em> commenced 26 August 2024 and introduced an "employee-like" jurisdiction for digital-platform and road-transport workers — but generally not for traditional construction subcontractors.
Frequently Asked Questions
Lock In Your Construction Subcontract Today
Enter the head contractor, subcontractor, project details, scope, price, and programme. Add SoPA enhanced procedure, variations, liquidated damages, WHS PCBU duties, and Personnel Contracting acknowledgement. Produce a state-aware, SoPA-compliant subcontract ready to sign.
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