Subcontractor Agreement Lawyers Adelaide: Trades, Builders, Licensing and Payment Claims
Subcontractor agreements in South Australia
A subcontract decides who carries the risk on a job, from variations and payment claims to defects. Talon Legal drafts and reviews subcontractor agreements for Adelaide builders and head contractors, and for the trades asked to sign them, from one-page work orders to subcontracts that sit under a head contract. Book a same-day free 30-minute consultation or call (08) 7094 2021.
Subcontractor agreement key facts
| Issue | Position in South Australia |
|---|---|
| Employee or contractor | For Fair Work Act purposes, the real substance, practical reality and true nature of the relationship decide (Fair Work Act section 15AA, from 26 August 2024). |
| Payroll tax | Payments under a relevant contract are taken to be wages unless an exclusion applies (Payroll Tax Act 2009 (SA) sections 32 and 35). |
| Unlicensed contracting | Maximum $100,000 for a natural person or $500,000 for a body corporate, first or second offence (Building Work Contractors Act 1995 (SA) section 6(1)). |
| No licence, no fee | Unless a court is satisfied the failure resulted from inadvertence only (section 6(2)). |
| Statutory warranties | Implied in every domestic building work contract; proceedings within five years after completion (section 32(2) and (5)). |
| Payment claims | Within the period under the contract or 6 months after the work was last carried out, whichever is later (Security of Payment Act section 13(4)); contracting out is void (section 33). |
| Unfair terms | Void in a standard form small business contract (ACL section 23(1) and (4)). |
| Liquidated damages | Open to challenge if out of all proportion to the interests protected (Paciocco v ANZ, Kiefel J (French CJ agreeing) at [29]). |
| First step | Same-day free 30-minute consultation. Call (08) 7094 2021. |
Need a subcontractor agreement lawyer in Adelaide?
Our subcontractor agreement lawyers in Adelaide act for builders and head contractors engaging trades, and for subcontractors reviewing the terms they are asked to sign. The Fair Work Act 2009 (Cth) decides whether an individual subcontractor is really an employee, the Payroll Tax Act 2009 (SA) can treat payments to subcontractors as wages, and the Building Work Contractors Act 1995 (SA) governs licensing and domestic building work contracts. This page states the law current to 6 November 2026.
This guide is part of our skilled trades and licensed industries practice. Related guides cover terms of trade and retention of title, equipment hire agreements, deeds of guarantee and quotes and variation agreements.
Free Consultation. Send us the subcontract, and the head contract if there is one, before the work starts. Book a same-day free 30-minute consultation or call (08) 7094 2021.
On this page
- What should a subcontract cover?
- How does the head contract flow down?
- How should variations and delays be handled?
- How do payment claims and retention work?
- Is a subcontractor an employee or a contractor?
- Do head contractors pay payroll tax on subcontractors?
- Does the subcontractor need a licence?
- What rules govern a builder's contract with a home owner?
- Can a subcontractor challenge unfair terms?
- How are indemnity and limitation clauses read?
- How similar matters tend to play out
- How we act on subcontractor agreements
- Case law
- Frequently asked questions
What should a subcontract cover?
Everything that decides who pays when the job goes wrong:
- Scope: drawings, specifications, inclusions and exclusions.
- Price: a fixed price or rates, any deposit, and a rate for out-of-scope work.
- Variations, progress claims, payment terms and retention.
- Time: completion dates, extension of time claims and liquidated damages.
- Defects: the defects liability period and the trade’s warranties.
- Insurance: contract works, public liability and workers compensation, with evidence before the first payment.
- Indemnities and caps on liability.
- Termination and disputes, including a duty to keep working while a dispute is resolved.
Many head contractors use a master subcontract with a short job form for each job. The master agreement should say neither side is bound to a job until its job form is signed.
Site safety belongs in the contract as site rules, inductions and incident reporting; this page treats it only as a contract topic. A subcontractor agreement lawyer will also read the terms on control, hours and exclusivity, which bear on whether an individual subcontractor is really an employee.
How does the head contract flow down?
Through terms that give the trade the head contractor’s obligations for its part of the job. The subcontract attaches or lists the head contract and requires the trade to work so the builder does not breach it.
A subcontractor should not accept “all obligations under the head contract” without a copy of the relevant parts. The usual trouble spots are notice periods for delays and variations, which are often shorter than the head contract’s so the builder can pass claims up in time. Others are a clause saying a revised construction schedule is not an extension of time, and termination if the head contract ends.
On domestic work, the builder’s contract with the owner carries statutory warranties (Building Work Contractors Act section 32(2)), and the builder will want matching defects obligations from each trade. Flow-down has a limit. A provision that excludes, modifies or restricts the Security of Payment Act is void (section 33).
How should variations and delays be handled?
In writing, before the work is done. A typical clause says the trade must not vary the work without a written direction, and that work done without one is not paid as a variation. Variations are valued at the subcontract’s rates or on an itemised quotation.
A clause letting the head contractor value variations “in its sole discretion” leaves the trade with no agreed price. In a standard form small business contract, a term letting one party alone vary the contract, or decide alone whether it has been breached, is a statutory example of a term that may be unfair (ACL section 25(d) and (h)). The quotes and variation agreements guide covers the paperwork. Delay claims need written notice of the cause and the extension sought, within the time allowed.
Liquidated damages are a daily amount for late completion, often capped and deducted from progress payments. In Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28, Kiefel J, with whom French CJ agreed, said the question for a sum payable on default is whether it is out of all proportion to the interests of the party it is meant to protect. Those interests may be business or financial ones ([29]).
How do payment claims and retention work?
Progress claims are usually monthly, showing the value of work done, variations, amounts already paid and the amount claimed. Retention is a percentage of each payment held as security, commonly part released at practical completion and the rest when the final certificate issues after the defects liability period. If the trade does not fix notified defects, the head contractor can usually have them fixed and take the cost from retention.
The Building and Construction Industry Security of Payment Act 2009 (SA) sits beside the subcontract. On and from each reference date under a construction contract, a person who has undertaken to carry out construction work, or to supply related goods and services, under the contract is entitled to a progress payment (section 8). A payment claim must identify the work, or the goods and services, indicate the amount claimed and state that it is made under the Act (section 13(1) and (2)). It must be served within the period the contract allows or 6 months after the work was last carried out (or the goods and services last supplied), whichever is later (section 13(4)). Only one payment claim may be served for each reference date (section 13(5)).
The Act has effect despite any contrary term. A provision that excludes, modifies or restricts it, or may reasonably be construed as an attempt to deter a person from taking action under it, is void (section 33). That matters for final releases, because some subcontracts return retention only if the trade releases all claims.
Is a subcontractor an employee or a contractor?
It depends on the real relationship. For Fair Work Act purposes, whether an individual is an employee, in the ordinary meaning of that expression, is determined by ascertaining the real substance, practical reality and true nature of the relationship (section 15AA(1)). The totality of the relationship must be considered, including how the contract is performed in practice (section 15AA(2)). Section 15AA commenced on 26 August 2024.
In CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1, the plurality held that where a relationship is comprehensively committed to a written contract that is not a sham and has not been varied, the contract’s legal rights and obligations are decisive of its character ([43] to [44]). Section 15AA was enacted as a response to that decision and a companion case (section 15AA note). For Fair Work Act purposes, section 15AA now governs the question.
A company that sends its own crew and tools to several builders looks like a contractor. An individual working only for one builder, on set hours, can look like an employee whatever the subcontract says.
An employer must not represent to an individual it employs, or proposes to employ, that the contract of employment is a contract for services as an independent contractor (section 357(1)), unless it proves it reasonably believed that was so (section 357(2)). Nor may it dismiss an employee, or threaten to, in order to engage them as an independent contractor to do the same, or substantially the same, work (section 358).
Do head contractors pay payroll tax on subcontractors?
They can, if they pay South Australian payroll tax. A relevant contract includes a contract under which a person, in the course of a business it carries on, is supplied with the services of another person for or in relation to the performance of work (Payroll Tax Act section 32(1)(b)). Amounts paid or payable by an employer for or in relation to the performance of work relating to a relevant contract are taken to be wages (section 35(1)), including payments that would be superannuation contributions (section 35(3)).
In summary, a relevant contract does not include a contract of service, or a contract under which the head contractor is supplied with services (section 32(2)):
- ancillary to the supply of goods.
- of a kind it does not ordinarily require, performed by a person who ordinarily performs such services to the public generally.
- of a kind ordinarily required for less than 180 days in a financial year.
- provided for not more than 90 days in aggregate in the financial year, subject to conditions.
- that the Commissioner is satisfied are performed by a person who ordinarily performs such services to the public generally in that year.
- where the work is performed by two or more persons employed by, or providing services for, the subcontractor (section 32(2)(c), with variants for partnerships and individuals).
- for certain goods conveyance, insurance procurement and door to door sales services.
The exclusions do not apply if the Commissioner determines the contract was entered into with an intention, directly or indirectly, of avoiding or evading tax (section 32(2d)).
A trade that sends two or more of its own workers to do the work is the typical case for section 32(2)(c). A sole trader working alone for one builder for most of the year is unlikely to fit it.
Does the subcontractor need a licence?
If it carries on business as a building work contractor, yes. A person must not carry on business as a building work contractor, or hold out as entitled to do so, except as authorised by a licence (Building Work Contractors Act section 6(1)). For a natural person, the maximum penalty is $100,000 for a first or second offence, and $150,000 or 12 months imprisonment, or both, for a third or later offence. For a body corporate, it is $500,000 for a first or second offence and $550,000 for a third or later offence. The expiation fee is $5,000.
A person required to be licensed is not entitled to any fee, other consideration or compensation under or in relation to a contract for the work, unless licensed or a court is satisfied the failure resulted from inadvertence only (section 6(2)). The Commissioner may grant exemptions (section 6(3)).
The subcontract should require the trade to hold any licence its work needs. Whether a given trade needs a building work contractor’s licence turns on the Act’s definitions, which this page does not set out.
What rules govern a builder’s contract with a home owner?
These rules shape the builder’s obligations, and so its subcontracts. They apply to domestic building work contracts entered into on or after 1 May 1987, but not to contracts for minor domestic building work (section 27).
A domestic building work contract must be in writing, set out all its terms in full, and set out the contractor’s business name under the licence and its licence number. It must comply with the regulations on contents, be signed by both parties (personally or by an authorised agent) and be readily legible. The owner must receive a copy of the signed contract as soon as reasonably practicable, with a notice in the prescribed form (section 28(1)). Non-compliance carries a maximum penalty of $50,000 for a natural person and $250,000 for a body corporate, and a $5,000 expiation fee (section 28(2)).
A person must not demand or require a payment under the contract unless it is a genuine progress payment for work already performed, or the person is entitled to it under the Security of Payment Act (section 30(1)), or it is a prescribed payment (section 30(2a)). The maximum penalty is $100,000 for a natural person and $500,000 for a body corporate.
The implied warranties (section 32(2)) cover proper work to accepted trade standards and the agreed plans and specifications, good and proper materials, compliance with statutory requirements, reasonable diligence where no completion period is stipulated, a house reasonably fit for habitation, and fitness for a purpose or result the owner made known, relying on the contractor’s skill and judgment. Proceedings for breach must start within five years after completion (section 32(5)), so a builder will want its trades’ warranties to match.
Can a subcontractor challenge unfair terms?
Yes, if the subcontract is a standard form small business contract. An unfair term in such a contract is void (ACL section 23(1)). A contract for services is a small business contract if at least one party employs fewer than 100 persons or had turnover under $10,000,000 in its last income year (section 23(4)). A contract alleged to be standard form is presumed to be one unless another party proves otherwise (section 27(1)).
A term is unfair if it would cause a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interests of the party it advantages, and would cause detriment if applied or relied on (section 24(1)). The advantaged party must prove the term is reasonably necessary (section 24(4)). Statutory examples include terms letting one party alone terminate or vary the contract, and terms penalising only one party for breach or termination (section 25(b) to (d)).
Since 9 November 2023, making a standard form small business contract containing an unfair term the person proposed, or applying or relying on one, is a contravention (section 23(2A) and (2C)). For a body corporate, the maximum penalty is the greater of $100,000,000 and three times the benefit or, if that cannot be determined, 30% of adjusted turnover during the breach turnover period. For anyone else it is $2,500,000 (ACL section 224(3) and (3A), in the Competition and Consumer Act 2010 (Cth)).
How are indemnity and limitation clauses read?
By their ordinary meaning, in the context of the whole contract. In Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82, on appeal from South Australia, the High Court held that an exclusion clause is construed according to its natural and ordinary meaning, read in the light of the contract as a whole. Due weight is given to the context, including the nature and object of the contract. Where appropriate, an ambiguous clause is read against the party that put it forward, and the same principle applies to limitation clauses ([16]).
Subcontract indemnities often cover any loss “arising directly or indirectly” from any breach, including liability under the head contract, and can exceed the subcontract price. A trade should seek to limit the indemnity to loss caused by its own breach or negligence, and to cap its total liability. Both sides should compare the indemnity with the insurance actually held. The deeds of guarantee guide covers security a head contractor can take from a trade’s directors.
How similar matters tend to play out
Three illustrations of how the law on this page combines on ordinary facts. They are not predictions. Outcome depends on the documents, the evidence and the court.
Lower range. A painting subcontractor on a commercial build last worked under its subcontract in March, and its final claim is unpaid. The subcontract sets no period for payment claims. The trade can serve a payment claim stating that it is made under the Security of Payment Act (section 13(2)) up to 6 months after the work was last carried out (section 13(4)). A term purporting to rule that out would be void (section 33).
Middle range. A builder that pays payroll tax engages a sole trader carpenter on a rolling subcontract. The carpenter works alone, only for that builder, for most of the year. The contract is likely to be a relevant contract (section 32(1)(b)), and neither the 180-day and 90-day exclusions nor the crew exclusion (section 32(2)(c)) fits. Unless another exclusion applies, the payments are taken to be wages (section 35(1)).
Upper range. A company that was required to hold a building work contractor’s licence, and did not, completes framing work for a builder, which refuses to pay. Unless a court is satisfied the failure resulted from inadvertence only, the company is not entitled to any fee for the work (section 6(2)). It also faces a maximum penalty of $500,000 for a first or second offence (section 6(1)).
How we act on subcontractor agreements
Our subcontractor agreement lawyers act for builders and head contractors, and for the trades they engage. For a trade, the aim is a clear scope and payment on time.
| Stage | What happens | What we do |
|---|---|---|
| Structure | The head contractor decides how to engage the trade. | Test the arrangement against section 15AA, the payroll tax exclusions and the licensing rules. |
| Drafting | The subcontract or work order template is prepared or reviewed. | Draft the terms to match the head contract. |
| Negotiation | One side's standard subcontract is on the table. | Identify unfair or uninsurable terms and propose workable changes. |
| Operation | Variations, delays and claims arise on site. | Advise on notices, variation pricing and payment claims. |
| Dispute or exit | Payment, defects or termination is disputed. | Advise on the subcontract and the Security of Payment Act, and recover what is owed. |
We cannot promise an outcome, and no lawyer can. We can make sure the subcontract says what you mean before a dispute tests it.
Before you sign. Book a same-day free 30-minute consultation or call (08) 7094 2021.
Subcontractor agreement case law
None of the decisions below decided a dispute over a construction subcontract; each decided a point that applies to one.
| Case | Court | Principle | Pinpoint |
|---|---|---|---|
| CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 | High Court | Written contract decisive of employment status; section 15AA now governs for Fair Work Act purposes | [43], [44] |
| Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82 | High Court | Construing exclusion and limitation clauses | [16], [19] |
| Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 | High Court | Test for a sum payable on default | [29] |
Case notes
CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1
The plurality held that where a relationship is comprehensively committed to a written contract that is not a sham, and has not been varied, waived or made the subject of an estoppel, the contract’s legal rights and obligations are decisive of its character ([43] to [44]). For Fair Work Act purposes, section 15AA now requires the whole relationship to be considered.
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82
On appeal from South Australia, the High Court held that exclusion and limitation clauses are construed by their natural and ordinary meaning, in the light of the whole contract, and where appropriate against the party that put them forward if ambiguous ([16]). A clause limiting a broker’s liability to $100 for each unauthorised contract applied ([19]).
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28
Kiefel J, with whom French CJ agreed, asked whether a provision for payment of a sum on default is out of all proportion to the interests it is intended to protect ([29]). Both appeals were dismissed.
Frequently asked questions
What is a subcontractor agreement?
A contract under which a head contractor engages a trade to carry out part of the work it has contracted to do.
Is a subcontractor an employee?
It depends on the real relationship, including how the contract is performed in practice (Fair Work Act section 15AA).
Can a builder turn its employees into subcontractors?
Not by dismissing them to engage them as contractors for the same or substantially the same work, which is prohibited (Fair Work Act section 358).
Do head contractors pay payroll tax on payments to subcontractors?
They can. Payments under a relevant contract are taken to be wages unless an exclusion applies, such as work done by two or more of the subcontractor’s workers (Payroll Tax Act 2009 (SA) sections 32(2)(c) and 35(1)).
Does a subcontractor need a building work contractor's licence?
If it carries on business as a building work contractor, yes (Building Work Contractors Act 1995 (SA) section 6(1)). Without a required licence it is not entitled to a fee unless a court is satisfied the failure resulted from inadvertence only (section 6(2)).
How long does a subcontractor have to serve a payment claim?
Within the period set by the contract or 6 months after the work was last carried out, whichever is later (Security of Payment Act section 13(4)).
Can a subcontract stop a trade from using the Security of Payment Act?
No. A term that excludes, modifies or restricts the Act, or may reasonably be construed as an attempt to deter a person from taking action under it, is void (section 33).
Are liquidated damages in a subcontract enforceable?
They can be. A sum payable on default is open to challenge if it is out of all proportion to the interests it protects (Paciocco v ANZ, Kiefel J (French CJ agreeing) at [29]).
Can a small subcontractor challenge unfair terms?
Yes, if the subcontract is a standard form small business contract, in which an unfair term is void (ACL section 23(1) and (4)).
Do I need a subcontractor agreement lawyer?
For a template used on every job, or a subcontract under a head contract, yes. A subcontractor agreement lawyer can match the subcontract to the head contract and check the payroll tax and licensing position before the work starts. A free 30-minute consultation will tell you where you stand.