Progress payments for new home builds in Australia — how they work and what to check

Progress payments are the mechanism by which you fund your builder at each stage of construction, and they are the most common source of financial risk in a residential build. Getting them right — releasing money only when a stage is genuinely complete — keeps you in control of your project from start to finish.

The standard five-stage payment schedule

Under most HIA and MBA residential building contracts, construction is divided into five stages, each triggering a progress payment claim from the builder. The standard schedule looks like this:

Stage	What is complete	Typical % of contract
Deposit	Before work begins	5–10%
Base (slab)	Concrete slab poured and cured	10–15%
Frame	Framing erected, roof trusses set	15–20%
Lock-up	Building enclosed, watertight	35–40%
Fixing	Internal fit-out substantially complete	20–25%
Practical completion	All contract works complete	2.5–5%

The specific percentages in your contract will vary. Some builders use different stage names or split stages differently. The key point is that each payment should correspond to a defined, measurable scope of completed work.

Deposit limits — what the law says

Before a builder can lawfully demand a deposit in Australia, your contract must be in writing and the builder must have home warranty insurance in place (for contracts above the threshold in each state, typically $20,000).

Deposit limits by state:

• Queensland: Maximum 5% for contracts under $20,000, maximum 10% for contracts over $20,000 (QBCC regulation)
• NSW: Maximum 10% for contracts under $20,000, maximum 10% for contracts over $20,000 (HIA contracts commonly use 5%)
• Victoria: No prescribed maximum for residential contracts over $10,000, but unfair contract terms provisions apply
• South Australia: 10% maximum for residential contracts
• Western Australia: 6.5% for contracts where home indemnity insurance applies
• Tasmania: 10% maximum for residential contracts
• ACT: No prescribed statutory maximum; seek advice before paying more than 10%

If a builder demands a deposit above these limits, or before providing home warranty insurance evidence, this is a serious red flag. Contact your state building authority before paying.

When does a progress payment become due?

A progress payment becomes due when the relevant stage is complete as defined in your contract. “Complete” means all the work included in that stage description has been finished — not “substantially finished” or “nearly done” unless your contract specifically uses that language.

The builder will issue a progress claim (a written notice that a stage is complete and payment is requested). You then have a defined period under your contract to either pay or raise a dispute — typically five to ten business days.

Common mistake: Many homeowners assume they must pay when the builder says a stage is complete, even if they have doubts. This is incorrect. You have the right to inspect before paying. The obligation to pay arises only when the stage is complete per the contract definition.

The right to withhold payment

You can legitimately withhold a progress payment if the stage is not complete. But you must do this correctly:

1. Inspect the work before the payment is due — commission an independent building inspector for every stage
2. Document specific deficiencies — the stage is incomplete because specific items are not done, not because you have a general concern
3. Notify the builder in writing before the payment deadline — explain which items are outstanding and that payment will be released once they are rectified
4. Be specific — “the frame inspection has identified that three wall bracing panels are missing (as detailed in the attached inspection report)” is enforceable; “I’m not happy with the frame” is not

Do not withhold payment for reasons that are not contract-based — for example, because you have a personal dispute with the builder, or because you want to use the payment as leverage on a separate issue. Courts and tribunals will not be sympathetic, and you may expose yourself to interest charges and contract breach claims.

Using construction finance (bank loans)

If you are using a construction loan to fund your build, the bank will manage progress payment drawdowns. Your lender will:

• Send a valuer to inspect and certify that each stage is complete before releasing funds
• Release funds directly to the builder on your instruction
• Hold back the final payment (often 5%) until practical completion and a satisfactory final valuation

The bank’s certification that a stage is complete is not the same as an independent building inspection. The bank’s valuer is checking that the stage is physically present and billable — not whether it has been built to the correct standard. You should still commission your own independent inspector at each stage regardless of what the bank does.

If your bank releases a progress payment for incomplete work (which occasionally happens), you may have difficulty recovering the situation. Contact your lender and your state building authority immediately if this occurs.

Variations and their impact on the payment schedule

Every variation to the contract work — whether you initiated it or the builder did — changes the contract price and can affect the payment schedule. For each variation, you should receive:

• A written variation order specifying exactly what is changing and why
• A price for the variation (cost increase or decrease)
• Written confirmation that you agree to the variation before work proceeds

Variations add to the contract price and are typically payable at the stage they relate to, or at practical completion if not otherwise specified. Track every variation in writing — a common dispute at the end of a build is a builder claiming you verbally approved variations that you do not recall.

Keep a register of all approved variations, with the date, amount, and a brief description. Your total contract price is the original contract price plus all approved variations.

What happens if you overpay?

If you release a progress payment for an incomplete or defective stage, recovering the money is very difficult. The most effective outcome is to have the builder complete the work — but if the relationship has broken down or the builder is in financial difficulty, you may be in a position where:

• The work remains incomplete
• The builder has been paid for work not done
• You have limited funds remaining to complete the build with another builder

This situation — where a builder abandons work after receiving payments — is exactly what home warranty insurance is designed to cover. If your builder stops work and is unable or unwilling to continue, contact your state building authority immediately and review your home warranty insurance policy.

Practical steps before releasing each payment

1. Receive the builder’s progress claim in writing — confirm the stage they are claiming completion for
2. Commission an independent inspection — do not rely on the builder’s own certifier
3. Walk through the site yourself — use a checklist and photograph everything you are uncertain about
4. Check the inspection report — confirm all items in the stage description are complete and defect-free
5. Notify the builder in writing of any outstanding items before the payment deadline
6. Release payment only when all stage items are complete per the contract
7. Keep records — retain all payment receipts, variation approvals, and inspection reports

Disputes about progress payments

If you and your builder disagree about whether a stage is complete, this is a building dispute that can be referred to:

• Queensland: QBCC (Queensland Building and Construction Commission) — free adjudication service
• NSW: NSW Fair Trading — building dispute resolution
• Victoria: DBDRV (Domestic Building Dispute Resolution Victoria)
• South Australia: CBS (Consumer and Business Services)
• Western Australia: Building Commission WA
• Tasmania: CBOS (Consumer, Building and Occupational Services)
• ACT: Access Canberra — building disputes

Most state authorities offer free or low-cost dispute resolution before tribunal proceedings. Use them early — the longer a payment dispute runs, the more likely construction stops and costs escalate.

Key Takeaways

• Never pay a progress claim until you have independently inspected the stage and confirmed it is complete as defined in your contract
• Deposit limits are prescribed by law in most states — typically 5–10%; do not pay more
• Withholding payment must be specific and written — identify exactly what is incomplete and notify before the payment deadline
• Bank construction loan valuations are not a substitute for independent building inspections
• Track every variation in writing; your total contract price is the original price plus all approved variations
• If a builder stops work after receiving advance payments, contact your state building authority and review your home warranty insurance immediately