When you hire a builder in Australia, you will almost certainly be asked to sign a contract with a progress payment schedule — a series of payments tied to construction milestones such as the laying of the slab, the frame being erected, and the lock-up stage. This structure makes sense in principle: you pay as work is completed, and the builder has cash flow to continue. In practice, disputes about whether milestones have actually been reached — and whether payments are justified — are among the most common causes of construction litigation in Australia. The Building and Construction Industry Security of Payment Acts (each state has its own) give builders and contractors powerful rights to claim payment quickly, with very short windows for owners to respond. Understanding how these laws work before you sign a building contract is critical — because once you are in dispute, the process moves extremely fast.
What is a Progress Payments?
A progress payment schedule in a building contract is an agreed timetable of payments tied to defined stages of construction. Typical residential stages in an HIA or Master Builders contract are: deposit (5%), base/slab (15-20%), frame (20%), lock-up (20%), fixing/fit-out (15%), and practical completion (balance). Each progress claim should correspond to an observable construction milestone. Under the Security of Payment legislation in each state, builders have the right to serve a payment claim, and owners must respond with a payment schedule within a tight deadline (often 10 business days). Failure to respond can result in the owner being liable for the full claimed amount without further dispute.
Red flags to watch for
Under most state Home Building Acts, the maximum deposit for a domestic building contract over $20,000 is 5% (6.5% in SA, 10% in WA for licensed builders). A higher deposit demand breaches the Act.
If the payment schedule says 'progress payments as invoiced' without milestone definitions, you have no contractual basis to dispute a claim even if work hasn't been completed.
Practical completion triggers the final payment and the start of the defects liability period. A vague definition allows builders to claim final payment before genuinely completing the work.
Many commercial building contracts include retention — a percentage withheld until defects are fixed. In residential contracts, the absence of any retention mechanism can leave you with no leverage if defects emerge after final payment.
If the builder has rights under the Security of Payment Act but the contract doesn't explain those rights and your corresponding obligations (responding to payment claims within time), you may inadvertently default.
Your legal rights
Building contracts in Australia are regulated by state and territory legislation. In NSW, the Home Building Act 1989 and Building and Construction Industry Security of Payment Act 1999 apply. Victoria has the Domestic Building Contracts Act 1995 and Building and Construction Industry Security of Payment Act 2002. Queensland has the Queensland Building and Construction Commission Act 1991 and Building Industry Fairness (Security of Payment) Act 2017. All Security of Payment Acts give contractors rapid-adjudication rights for unpaid progress claims. As an owner, you must respond to a payment claim by serving a payment schedule within the specified time — typically 10 business days. Failure to do so means you owe the full claimed amount by default.
Questions to ask before you sign
- 1What is the deposit percentage, and does it comply with the maximum under my state's Home Building Act?
- 2Are each of the progress payment stages tied to specific, observable construction milestones?
- 3What is the precise definition of 'practical completion' in this contract?
- 4What rights do I have if I dispute that a milestone has been reached before paying a progress claim?
- 5Under the Security of Payment Act, how many days do I have to respond to your payment claims?
- 6Is there a defects liability period after practical completion, and is any retention withheld until defects are rectified?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.