Payments and deductions

Payments

It’s important to know your rights and obligations when it comes to paying deposits and making progress payments.

Deposits

Maximum deposit percentages are set out in Schedule 1B of the QBCC Act 1994 and must not be exceeded:

10 per cent if the total contract price is under $20,000
5 per cent if the total contract price is $20,000 or more
20 per cent for a contract of any price where the value of the work performed off-site is more than 50 per cent of the total contract price.

Progress payments

If your contract allows for milestone and time-related (progress) payments, your builder may issue you with various payment claims.

Only make payments to the person or company whose name appears in your contract, and you’re only required to make payments at the times specified in the contract.

GST & progress claims

Your contractor is required to collect and pay the compulsory QBCC home warranty insurance premium on your behalf (you will receive a separate tax invoice from the QBCC).

Your contractor is not eligible to claim the GST component of this premium (it’s not considered a taxable supply). If your contractor is using the Master Builders progress claim/tax invoice template, the home warranty insurance premium is noted separately within section 3. This is to assist the contractor to comply with federal GST legislation and it’s important to note that GST has not been applied to this premium.

Deductions

Liquidated damages

Liquidated damages are costs you can deduct from the builder on or after practical completion of your home, if they fail to complete the build by the date specified in your contract or extended by the terms of the contract.

These costs are agreed to by both parties before signing the contract, and represent a pre-estimate of the loss (at the time the contract was entered into) that may result from a specific breach of contract.

Retention amounts

You can only hold a retention amount if the residential contract terms allow a retention amount to be deducted and retained by the owner.

If you have a right of retention, the contract conditions should specify the percentage of the amount you can deduct and retain from the GST exclusive contract sum. The amount retained secures the performance of the contractor's obligation under the contract, including the contractor's obligation to rectify defects.

Security and holding accounts

Your building contract may contain a provision enabling the use of a security account for money that isn't subject to loan approval from a financial institution. This could include:

Depositing contract money into Master Builders' holding account
Opening a joint account
Obtaining an unconditional bank guarantee.

Master Builders’ Holding Account

If there’s a financial dispute between parties to a written building contract – the disputed amount of money can be held in trust within Master Builders’ holding account until the matter is resolved.

Master Builders’ holding account can be used if: