We hope you find these articles helpful in building your home.

Deposits and Progress Payments

Your building agreement/contract (which may be a written quote that you accept in the case of smaller jobs valued at under $3300) should clearly state the payment arrangements which you have worked out with the contractor (including specific amounts for the deposit and progress payments, if any, and details of when these payments are to be made).

The Domestic Building Contracts Act 2000 (the DBC Act) sets out maximum deposits for domestic building work, depending on the value of the job, and progress payment schedules for projects involving the construction of a home.

Maximum deposits

The DBC Act provides that if the domestic building work is valued at $20,000 or more, the deposit must not exceed 5% of the total contract price. If the domestic building work is valued at more than $3,300 but less than $20,000, the deposit must not exceed 10%. (Note: although the DBC Act does not stipulate a maximum deposit for projects less than $3,300, BSA recommends no more than 20%).

These are the maximum deposits allowed under the DBC Act. You may negotiate and agree on a lesser deposit with your contractor, depending on a range of factors including how long the project will take to complete and what costs the contractor will incur (e.g. purchase of materials, preparation of plans, etc.) before commencing work.

It is an offence for a contractor to demand or receive a deposit which exceeds the amount provided for in the DBC Act.  Demerit points can be allocated against the contractor's licence for this offence.  If your contractor demands or receives a deposit in excess of that provided for in the DBC Act please notify BSA.

Progress payments

For contracts involving all stages of construction of a home:

Stage of Work

Max. Percentage of
Total Contract Price

1 deposit

5%

2 base stage

10%

3 frame stage

15%

4 enclosed stage

35%

5 fixing stage

20%

6 practical completion

15%

The above construction stages (called 'designated stages') are defined in Schedule 2 of the DBC Act. Section 66 of the DBC Act also provides less detailed payment schedules for home construction where not all of the above designated stages are involved (e.g. where the contracted work finishes at the enclosed or fixing stage).

There is scope for you and the contractor to vary the progress payment arrangements, but only where the contractor has given you a notice setting out the matters in the Domestic Building Contracts Regulation 2000 before entering into the contract and you have initialled the clause of the contract that sets out the alternative progress payments. It is not possible to vary the maximum deposit amounts. Always be careful not to pay in advance of work progress as this may reduce the protection available to you under BSA’s Statutory Insurance Scheme in the event of contractor failure (e.g. through death or bankruptcy).

This information has been prepared by the BSA. This is only a general guide - not a substitute for professional advice. Santo Correnti Homes Pty Ltd does not guarantee the accuracy, reliability, or completeness of any information on this page, and will not be liable for any loss or damage suffered as a result of anyone's relying on this information. We recommend you obtain advice from your own financial, taxation or legal advisor before entering into financial transactions.