It’s not enough to be only great on the tools in construction.

You need to have business nous which includes, among other things, understanding building administration.

Here’s what you need to know about payment claims, payment schedules and tax invoices.

Tax invoices, payment claims and payment schedules are three pieces of building project administration that builders and contractors must understand, and use correctly, in order to get paid on time and for the right amount.

What is a Payment Claim? 

Payment claims occur under the Security of Payments Legislation (SOPA). 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.

What’s the difference between a Payment Claim and a Tax Invoice?

The difference between the payment claim and a tax invoice is that an invoice is to be given after the payment is received. A payment claim however needs to be given to request for payment.

What’s the difference between a Payment Claim and a Payment Schedule? 

The difference between the payment claim and a payment schedule is that a payment claim is made to request for payment. A payment schedule however is provided in response to a claim.

What is a tax invoice? 

The function of the tax invoice, under A New Tax System (Goods and Services Tax) Act 1999, is to function as evidence of receipt of payment and to assist with applying the goods and services tax (GST).

What’s the difference between a tax invoice and a payment claim? 

Understanding the purpose of a tax invoice verses a payment claim can be confusing.  It’s a complex matter that is often better dealt via a building and construction lawyer who can advise on the individual circumstance.

Here is what makes it tricky to understand: A tax invoice can be a payment claim and the other way around. Regardless, there is a proper process to follow and it’s important not to mix it up:

  • Firstly, issue a payment claim which can also be in the form of a tax invoice.
  • Then if you haven’t issued a tax invoice with your payment claim, be sure to issue a tax invoice when you receive a payment schedule or when the payment claim turns into a statutory debt under the Security of Payments.

What is a payment schedule? 

The point of the payment schedule is to verify the amount the builder/owner/head contractor is agreeable to pay the claimant.  If you’re a builder, for example, you need to make sure you serve a payment schedule on your contractors. Failing to do so can expose you to automatically owing the entire amount of the payment claim the contractor is expecting. This is how payment schedules can protect a builder against a crooked contractor.

So that’s pretty much what you need to know regarding the difference between payment claims, schedules and tax invoices.
It doesn’t matter if you are a subbie, sole trader or the head contractor, understanding your rightsbeing able to communicate effectively, and knowing how to successfully manage your paperwork is how you will succeed in the building game. Along with being great on the tools.

It’s a sustainable business method that we recommend to all our clients.