small-builders-5-progress-claim-tax-invoices-payment-schedules-explainedBuilders and contractors often ask us to explain the difference between payment claim, tax invoices and payment schedules; three distinct yet equally important elements to getting paid.

To prevent being short-changed it is critical to understand the difference between Payment Claim, tax invoices, and payment schedules. So, here goes:

 

Payment Claim 

In the true definition, payment claims arise under the Security of Payments Legislation. A payment claim is made by the guy carrying out the work and is given to the person paying or their representative like the architect or superintendent.

The purpose of the payment claim is to request for payment. That is a simple summary of Payment Claim.

Important: Payment Claims also have a place under the Home Building Legislation. Don’t confuse the two.

Payment Claim Differentiated
The difference between the payment claim against a tax invoice is that a tax invoice is required to be given after a payment is received. A payment claim however is required to be given prior to receiving payment.

A payment claim is made to request for payment. The difference between the payment claim against a payment schedule is that a schedule is given in response to a payment claim.

Tax Invoice
Under A New Tax System (Goods and Services Tax) Act 1999, the purpose of the tax invoice is to act as an evidence receipt of payment and to assist with applying goods and services tax (GST).

Tax Invoices Differentiated
What’s the difference between tax invoice and payment claim? Understandably, here’s where people get confused. It is a complex subject that ideally is worked on with a building and construction lawyer to advise on the particular circumstance.

Here’s what makes it tricky: A tax invoice can also be a payment claim and vice versa.

Despite this mix and match, when it comes down to tax invoice vs payment claim, the proper process to follow is to:

  1. Issue a payment claim
  2. Issue a tax invoice upon receipt of a payment schedule or when the payment claim crystalises into a statutory debt under the Security of Payments Law.

Payment Schedule
The purpose of the payment schedule is to confirm the details of the payment a respondent is willing to make to the claimant.

Builders need to make sure they serve their payment schedule on contractors. Failing to serve payment schedules in response to a payment claim can expose builders to automatically owing the entire payment claim amount to the contractor.

This is why payment schedules are helpful in defending builders against dodgy contractors.

Any questions? Call us at Small Builders on: 02 0896 8576. We’d be happy to talk you through it.