Subcontractor Agreement (Australia)
Building and Construction Industry — Security of Payment
This Subcontractor Agreement (the “Agreement”) is made on [Agreement Date] between:
[Head Contractor Name] (ABN [Head Contractor ABN], ACN [Head Contractor ACN]), of [Head Contractor Address], [Head Contractor City] [Head Contractor State] [Head Contractor Postcode], Builders Licence No. [Head Contractor Licence] (the “Head Contractor”); and
[Subcontractor Name] (ABN [Subcontractor ABN]), of [Subcontractor Address], [Subcontractor City] [Subcontractor State] [Subcontractor Postcode], Licence No. [Subcontractor Licence] (the “Subcontractor”).
The Head Contractor and the Subcontractor are referred to collectively as the “Parties”.
BACKGROUND
A. The Head Contractor has entered into a principal contract with a principal for the construction of works known as [Project Name] at [Project Address] (the “Project”).
B. The Head Contractor wishes to engage the Subcontractor to perform part of the construction works on the Project on the terms and conditions set out in this Agreement.
1. SUBCONTRACT WORKS
1.1 The Subcontractor agrees to carry out and complete the following works at the Project site at [Project Address], [Project State] (the “Subcontract Works”):
[Scope of Work]
1.2 The Subcontractor shall perform the Subcontract Works in a proper and workmanlike manner, in accordance with: (a) this Agreement; (b) all applicable laws, regulations, and Australian Standards; (c) all applicable codes of practice and industry standards; and (d) any directions given by the Head Contractor in accordance with this Agreement.
1.3 The Subcontractor holds and must maintain all trade licences and registrations required by law to perform the Subcontract Works in [Project State], including Licence No. [Subcontractor Licence].
2. COMMENCEMENT AND COMPLETION
2.1 The Subcontractor must commence the Subcontract Works on [Commencement Date] (or as directed by the Head Contractor).
2.2 The Subcontractor must achieve practical completion of the Subcontract Works by [Completion Date] (the “Date for Practical Completion”), subject to any extension of time granted in accordance with this Agreement.
2.3 Time is of the essence in relation to the Date for Practical Completion.
2.4 The Subcontractor may apply for an extension of time for practical completion where delay is caused by: (a) a variation instructed by the Head Contractor; (b) a suspension directed by the Head Contractor without cause attributable to the Subcontractor; or (c) a qualifying cause of delay beyond the Subcontractor’s reasonable control. The Subcontractor must give written notice of a delay claim within 5 business days of becoming aware of the delay, failing which the Subcontractor’s entitlement to an extension of time is reduced or forfeited.
3. CONTRACT SUM AND PROGRESS PAYMENTS
3.1 In consideration for the performance of the Subcontract Works, the Head Contractor will pay the Subcontractor the [Contract Sum Type] of [Contract Sum] (exclusive of GST) (the “Contract Sum”), subject to any additions or deductions made in accordance with this Agreement.
3.2 GST of 10% is payable in addition to the Contract Sum. The Subcontractor must issue a valid tax invoice under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) before GST is payable.
3.3 Progress payments will be made in accordance with the following schedule:
[Payment Schedule]
3.4 The Head Contractor will pay each progress payment within 15 business days of receiving a valid payment claim from the Subcontractor. Any pay-when-paid or pay-if-paid arrangement is void and of no effect under the applicable Security of Payment Act.
4. SECURITY OF PAYMENT
4.1 This Agreement is a “construction contract” for the purposes of the Building and Construction Industry (Security of Payment) legislation applicable in [SOP State]. The Subcontractor has rights under that legislation to serve payment claims, receive payment schedules, and refer disputed amounts to adjudication.
4.2 The Subcontractor may serve a payment claim on the Head Contractor at the end of each reference date specified in clause 3.3 above (or as otherwise agreed). The payment claim must identify the construction work to which it relates and the amount claimed.
4.3 If the Head Contractor disputes the amount claimed, the Head Contractor must issue a payment schedule within the time required by the applicable Security of Payment Act, failing which the Head Contractor becomes liable for the full amount claimed.
4.4 If a dispute arises about a payment claim, the Subcontractor may apply for adjudication in accordance with the applicable Security of Payment Act. The cost of adjudication is determined by the adjudicator.
4.5 Nothing in this Agreement limits or excludes the Subcontractor’s rights under the applicable Security of Payment Act. Any provision of this Agreement that is inconsistent with the applicable Security of Payment Act is void to the extent of the inconsistency.
5. DEFECTS LIABILITY PERIOD
5.1 The Defects Liability Period is [Defects Liability Period] (the “Defects Liability Period”) commencing on the date of practical completion of the Subcontract Works.
5.2 During the Defects Liability Period, the Subcontractor must promptly rectify any defects in the Subcontract Works notified by the Head Contractor, at the Subcontractor’s own cost.
5.3 If the Subcontractor fails to rectify a defect within 7 business days of written notice, the Head Contractor may engage another contractor to rectify the defect and recover the reasonable cost from the Subcontractor or from the Retention.
6. VARIATIONS
6.1 The Head Contractor may instruct variations to the Subcontract Works by written notice. The Subcontractor must not carry out any varied work until a written variation instruction has been issued.
6.2 The Subcontractor must provide written notice of any proposed variation, including a detailed cost estimate, no later than [Variation Notice] before commencing the varied work. Failure to comply with this notice requirement may result in forfeiture of the Subcontractor’s entitlement to additional payment.
6.3 Variations will be valued by agreement between the Parties. Failing agreement, variations will be valued by reference to the rates in any schedule of rates forming part of this Agreement, or, if no rates apply, at fair market rates for comparable work.
7. INSURANCE
7.1 The Subcontractor must take out and maintain, at their own cost, throughout the performance of the Subcontract Works and during the Defects Liability Period:
- Public liability insurance with a minimum indemnity of [Public Liability Insurance] per occurrence, noting the interests of the Head Contractor.
- Workers’ compensation insurance: [Workers Comp Insurance].
- Any other insurance required by law or by the principal contract.
7.2 The Subcontractor must provide the Head Contractor with certificates of currency for all required insurance policies before commencing the Subcontract Works and within 5 business days of any renewal.
7.3 The Subcontractor must not do anything that might void, cancel, or prejudice any insurance policy.
8. WORK HEALTH AND SAFETY
8.1 Both Parties are Persons Conducting a Business or Undertaking (PCBUs) under the Work Health and Safety Act 2011 (Cth) and equivalent [SOP State] legislation. Each owes a primary duty of care to ensure, so far as is reasonably practicable, that the work carried out does not put any person at risk of death or serious injury.
8.2 The Subcontractor must: (a) comply with all applicable WHS laws and the Head Contractor’s site safety management plan; (b) attend all required site inductions before commencing work; (c) report any incidents, near misses, or unsafe conditions to the Head Contractor’s site manager immediately; and (d) not direct or permit any person to carry out work in an unsafe manner.
8.3 The Subcontractor is responsible for the WHS of their own employees, subcontractors, and workers on the Project site.
9. TERMINATION
9.1 The Head Contractor may terminate this Agreement for cause by written notice if the Subcontractor: (a) fails to commence or diligently progress the Subcontract Works; (b) commits a material breach and fails to remedy it within 7 business days of written notice; (c) becomes insolvent; or (d) abandons the Subcontract Works.
9.2 The Subcontractor may terminate this Agreement if the Head Contractor fails to pay a progress payment that is due and payable within 14 days of the Subcontractor’s written notice of the failure to pay.
9.3 On termination, the Subcontractor is entitled to payment for Subcontract Works properly performed to the date of termination plus the reasonable value of materials reasonably ordered for the Subcontract Works and for which the Subcontractor is legally obliged to pay.
10. GENERAL PROVISIONS
10.1 Governing Law. This Agreement is governed by the laws of [Governing State], Australia. The Parties submit to the exclusive jurisdiction of the courts of [Governing State].
10.2 Entire Agreement. This Agreement constitutes the entire agreement of the Parties with respect to the Subcontract Works and supersedes all prior negotiations, representations, and agreements.
10.3 Amendments. This Agreement may only be varied by a written document signed by both Parties.
10.4 Assignment. The Subcontractor must not assign the benefit of this Agreement or sub-subcontract any part of the Subcontract Works without the prior written consent of the Head Contractor.
10.5 Notices. Notices under this Agreement must be in writing and delivered by email, hand, or registered post to the addresses stated in this Agreement.
EXECUTED as an Agreement.
HEAD CONTRACTOR
[Head Contractor Name]
ABN: [Head Contractor ABN]
Address: [Head Contractor Address], [Head Contractor City] [Head Contractor State] [Head Contractor Postcode]
SUBCONTRACTOR
[Subcontractor Name]
ABN: [Subcontractor ABN]
Address: [Subcontractor Address], [Subcontractor City] [Subcontractor State] [Subcontractor Postcode]
Head Contractor
________________
Signature
Date: ________________
Subcontractor
________________
Signature
Date: ________________
What Is a Subcontractor Agreement (Australia)?
A Subcontractor Agreement in Australia engages an independent contractor to deliver defined work and records the scope, fees, intellectual-property ownership, and confidentiality terms, with the contractor's status distinguished from employment under the Corporations Act 2001 (Cth).
Subcontractor agreements in Australia operate within a complex regulatory environment that is unique to the building and construction industry. Unlike general commercial service agreements, construction subcontracts in Australia are subject to the Building and Construction Industry Security of Payment Acts (SOP Acts) — separate legislation in each state and territory — which provide subcontractors with statutory rights to progress payments that cannot be contracted out of. Pay-when-paid and pay-if-paid clauses, common in other jurisdictions, are void under Australian SOP legislation.
The applicable SOP Act depends on the state or territory in which the construction work is performed. New South Wales operates under the Building and Construction Industry Security of Payment Act 1999 (NSW). Queensland's legislation is the Building Industry Fairness (Security of Payment) Act 2017 (QLD). Victoria has the Building and Construction Industry Security of Payment Act 2002 (VIC). Western Australia, South Australia, Tasmania, the ACT, and the Northern Territory each have their own equivalent legislation. In March 2025, the Commonwealth Government released its response to the Murray Review, signalling support for a nationally aligned SOP regime.
A well-drafted Australian subcontractor agreement addresses scope of work, program, contract sum and progress payments, the subcontractor's rights under the SOP Act, retention, defects liability, variations, liquidated damages for delay, insurance, work health and safety obligations, and dispute resolution.
The legal framework governing the Subcontractor Agreement (Australia) in Australia draws on several key statutes and regulatory bodies. Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Parties executing a Subcontractor Agreement (Australia) in Australia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Corporations Act 2001 (Cth) sets the foundational requirements.
When Do You Need a Subcontractor Agreement (Australia)?
A Subcontractor Agreement is essential whenever a head contractor engages a subcontractor to perform construction work in Australia. Without a written subcontract, the parties' rights and obligations — particularly regarding payment, variations, defects, and delay — are governed by poorly defined implied terms and the sometimes-complex default provisions of the applicable SOP Act and general law.
A subcontractor agreement is needed for: engaging a trade contractor (electrician, plumber, concretor, tiler, painter, carpenter, etc.) to perform specialist work on a residential or commercial construction project; engaging a specialist consultant or professional to provide design or certification services in connection with a construction project; sub-subcontracting work to a lower-tier contractor; and any construction engagement where work will be performed over a period of time and progress payments will be made.
The agreement protects both parties. For the head contractor, it defines the scope and standard of the subcontract works, establishes the program and liquidated damages for delay, provides mechanisms for variations and defects rectification, and confirms the subcontractor carries the required insurance and holds all necessary licences. For the subcontractor, it documents the agreed contract sum and payment terms, preserves and supplements the subcontractor's statutory rights under the SOP Act, confirms clarity about the scope of works (preventing the head contractor from claiming a disputed item is included in the subcontract), and provides clear grounds for termination if the head contractor fails to pay.
The Australia Subcontractor Agreement (Australia) template is suitable for use across all Australian states and territories, including New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, the Australian Capital Territory, and the Northern Territory.
Parties in Australia should prepare a Subcontractor Agreement (Australia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Subcontractor Agreement (Australia)
A well-drafted Australian Subcontractor Agreement must address several key elements that are specific to the Australian construction law environment.
The scope of works is the foundation of the subcontract. It should describe the subcontract works with precision, referencing approved drawings, specifications, and schedules where applicable. An ambiguous scope of works is the most common cause of payment disputes in the construction industry.
Security of payment provisions must be addressed even where the contract is silent, because the SOP Acts apply to all construction contracts as a matter of law. A well-drafted agreement should acknowledge the subcontractor's statutory rights under the applicable SOP Act, specify reference dates for payment claims, and confirm that pay-when-paid provisions are void. Any provision that purports to reduce, restrict, or exclude the subcontractor's rights under the SOP Act is void to the extent of the inconsistency.
Retention provisions should specify the retention percentage, the maximum amount of retention, and the conditions for release. Where retention trust legislation applies (currently in NSW and QLD above threshold values), the agreement should acknowledge the obligation to hold retention in trust.
Insurance requirements are critical. The agreement must specify the types and minimum amounts of insurance required, and should require the subcontractor to provide certificates of currency before commencing work.
Work health and safety obligations reflect the concurrent PCBU duties of both the head contractor and the subcontractor under the WHS Acts. The agreement should specify both parties' WHS responsibilities, including the subcontractor's obligation to comply with the site safety management plan and Safe Work Method Statements for high-risk construction work.
Variation procedures must be clearly documented. Verbal variations are a common source of dispute. The agreement should require written variation instructions before any varied work commences and specify how variations will be valued.
Additional compliance elements for a Subcontractor Agreement (Australia) used in Australia include: Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Forms-legal.com provides this template as a starting point for Australia-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Subcontractor Agreement (Australia) (Australia) [Legal document template]. Forms Legal. https://forms-legal.com/australia/business/contracts/subcontractor-agreement-australia
"Subcontractor Agreement (Australia) (Australia)." Forms Legal, 2026, https://forms-legal.com/australia/business/contracts/subcontractor-agreement-australia.
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title = {Subcontractor Agreement (Australia) (Australia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/australia/business/contracts/subcontractor-agreement-australia}},
note = {Free legal document template. Based on Corporations Act 2001 (Cth)}
}Also available for these jurisdictions:
Frequently Asked Questions
The Building and Construction Industry Security of Payment Acts (SOP Acts) are state and territory legislation designed to require that contractors and subcontractors can recover progress payments for construction work. Every Australian state and territory has its own version of the legislation. The Acts create a statutory right to progress payments at the end of each reference date regardless of any contractual arrangement that might otherwise delay or prevent payment. Crucially, pay-when-paid and pay-if-paid clauses — which would make payment to a subcontractor conditional on the head contractor being paid — are void under the SOP Acts. If a head contractor disputes a payment claim, they must issue a payment schedule within the statutory timeframe; failure to do so means the full claimed amount becomes immediately payable. Subcontractors can refer disputed amounts to a rapid adjudication process — typically resolved within 10 to 15 business days — avoiding expensive litigation. The Commonwealth Government released the Murray Review response in March 2025, indicating support for greater national alignment of SOP legislation across jurisdictions.
Subcontractors in the Australian building and construction industry are generally required to hold: (1) public liability insurance, typically with a minimum of $10 million per occurrence, to cover third-party personal injury and property damage claims; (2) workers' compensation insurance as required by the laws of the relevant state or territory for all employees and deemed workers; and (3) any other insurance required by the principal contract or by law, such as plant and equipment insurance or contract works insurance. Professional subcontractors (such as engineers, architects, or building certifiers) may also be required to hold professional indemnity insurance. Licence conditions in some states and territories (such as the QBCC in Queensland or NSW Fair Trading) may specify minimum insurance requirements as a condition of holding a contractor licence.
Retention is a percentage of progress payments (typically 5% to 10%) that the head contractor withholds from the subcontractor during the course of the works as security for the subcontractor's performance and defects rectification obligations. Half of the retention is typically released on practical completion of the subcontract works and the remaining half is released at the end of the defects liability period, provided all defects have been rectified. Some states and territories have enacted retention trust legislation to require head contractors to hold retention monies in trust for the benefit of subcontractors. In New South Wales, the Building and Construction Industry Security of Payment Amendment Act 2018 introduced retention trust requirements for contracts above a threshold value. Queensland has similar provisions under the Building Industry Fairness (Security of Payment) Act 2017.
Under the Security of Payment Acts, a subcontractor serves a payment claim on the head contractor at the end of a reference date (which may be a date specified in the contract or the last day of each month). The payment claim must: (1) identify the construction work or related goods and services to which it relates; (2) indicate the amount of the progress payment claimed; and (3) in most jurisdictions, be endorsed as a payment claim made under the applicable Act. The head contractor must respond with a payment schedule within the statutory timeframe — for example, 15 business days in NSW or 15 business days in QLD — or within any shorter time specified in the contract, if shorter. Failure to provide a payment schedule can result in the head contractor becoming liable for the full amount claimed and losing the right to dispute the payment in adjudication.
Under the Work Health and Safety Act 2011 (Cth) and equivalent state and territory WHS legislation (adopted by NSW, QLD, SA, TAS, ACT, NT and, from 2024, WA), both the head contractor and the subcontractor are Persons Conducting a Business or Undertaking (PCBUs) with concurrent primary duties of care to requires the health and safety of workers and other persons so far as is reasonably practicable. The head contractor, as the principal PCBU on the construction site, bears significant WHS management responsibilities. The subcontractor must comply with the WHS Act, the site safety management plan, Safe Work Method Statements (SWMS) required for high-risk construction work, and any reasonable WHS directions from the head contractor. In Victoria, which operates under the Occupational Health and Safety Act 2004 (Vic), similar duties apply. Failure to comply with WHS duties can result in substantial fines and, in cases of gross negligence causing death, criminal prosecution.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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