Building contracts · Payments
Stage Payments for Building Work
What each stage payment on a residential build is actually paying for, what the law limits, and what to satisfy yourself about before you release the money.
Why stage payments cause so much trouble
Most Australian residential building contracts are paid in stages. The contract sets out a schedule of named stages, base, frame, lock-up, fixing and completion, with a fixed amount or percentage attached to each. When the builder says a stage is reached, the owner pays that amount. It is simple to write and easy to understand, which is why it is so widely used.
The difficulty is that a stage is a moment in a document, and building work is continuous. Trades overlap. Materials are bought and stored weeks before they are installed. A job can be substantially at lock-up while a handful of items remain outstanding. So the question "has the frame stage been reached?" turns out to have no self-evident answer, and both parties have money riding on it.
The stages also have nothing to do with how the builder actually incurs cost. A builder can be carrying wages, subcontractor accounts and material invoices for weeks with no contractual right to claim, because the next stage has not been reached. That pressure is what produces front-loaded stage schedules, where the early stages are priced above their true value so the builder is not financing the job.
- Whether a stage is "reached" is a judgement call, and it is the trigger for a large payment.
- Stage amounts often do not match the value of the work actually done at that point.
- Early stages get front-loaded, so an owner can be well ahead of the value on site.
- The builder carries the cash-flow gap between stages, which pushes cost and risk around.
- Materials delivered but not installed sit in a gap: paid for by the builder, not yet claimable.
- Variations rarely fall neatly within a stage, so valuing and claiming them is awkward.
The legal limits on what you can be asked to pay
Residential building work is regulated, and the payment structure is one of the regulated parts. Two limits matter most. The first is the deposit. Each state caps what a builder may take before work starts, and the caps differ: in New South Wales the maximum is 10 per cent of the contract price; in Victoria it is 5 per cent where the contract price is $20,000 or more; in Western Australia it is 6.5 per cent for building work valued above $7,500. A demand above the applicable cap is not merely unreasonable, it is unlawful, and in some states it can affect the owner’s insurance protection.
The second limit is on the progress payments themselves. Residential building legislation generally requires that a progress payment be either a specified amount or percentage payable on a specified stage, or an amount payable for labour and materials for work already performed. What it does not permit is a payment that is simply demanded ahead of the work. That is the legal reason a stage schedule has to name its stages and fix its amounts rather than leave them to be settled later.
These figures are the current position and they change. They also vary with the contract value and, in some states, with the type of work. Before relying on any of them for a particular project, check the Act that governs residential building work in that state.
A typical residential stage payment schedule, and what to check
| Aspect | What the payment usually covers | Before you release it |
|---|---|---|
| Deposit | Mobilisation, insurances, early ordering and preliminary work before anything appears on site. | Confirm it is within the statutory cap for the state, that the builder’s licence and home warranty cover are in place, and that the contract is signed. |
| Base or slab | Site works, excavation, footings and the slab or subfloor structure. | Slab poured and cured, engineer’s or certifier’s inspection passed, and set-out consistent with the approved drawings. |
| Frame | Wall and roof framing erected, ready for the frame inspection. | Frame inspection certificate issued, and any bracing or tie-down items noted by the inspector rectified rather than deferred. |
| Lock-up | Roof on, external walls, windows and external doors installed so the building can be secured. | The building genuinely closes and locks. Missing glazing or temporary hoarding in place of doors is not lock-up. |
| Fixing or fit-out | Internal linings, cabinetry, tiling, architraves, skirtings and internal fixtures. | Work is complete rather than substantially complete, and defects already identified are rectified, not carried forward to completion. |
| Practical completion | The balance of the contract price, less any retention the contract allows. | Occupation certificate or equivalent available, defects list agreed in writing, warranties and manuals handed over, and any retention correctly withheld. |
Who this protects
Owners & owner-builders
Each stage payment is money you cannot easily recover. Knowing what the stage is meant to deliver, and what evidence to ask for, is the practical protection.
Builders
A stage schedule that reflects the real value of work at each point is easier to claim against and far less likely to be argued about than a front-loaded one.
Architects
As contract administrator you are the one deciding whether a stage has been reached. Clear stage definitions in the contract make that decision defensible.
Common questions
What are stage payments for building work?
Stage payments are instalments of the contract price, each becoming payable when the building work reaches a defined stage such as base, frame, lock-up, fixing or completion. The contract names the stages and fixes the amount or percentage attached to each, so the payment is triggered by the milestone rather than by a valuation of the work done.
How much deposit can a builder ask for in Australia?
It depends on the state and the contract value. In New South Wales the maximum is 10 per cent of the contract price. In Victoria it is 5 per cent where the contract price is $20,000 or more. In Western Australia it is 6.5 per cent for building work valued above $7,500. These caps are set by each state’s residential building legislation and change from time to time, so confirm the current figure before paying.
What happens if I disagree that a stage has been reached?
Do not simply withhold payment without saying why. Put the disagreement in writing, identify precisely what you say is outstanding, and follow whatever notice or dispute procedure the contract sets out. On an architect-administered contract the architect assesses the claim, so raise it with them. Unexplained non-payment can itself put an owner in breach and, under security of payment legislation, can hand the builder a fast route to recovery.
Can a building contract use monthly progress payments instead of stages?
Yes. Monthly progress payments, where the builder claims each month for the value of work actually completed and the architect certifies it, are standard on commercial work and are used on residential work as well. Moving a residential contract from a stage schedule to monthly claims is a change to the payment machinery of the contract, not a single-line amendment.
Should the last stage payment be held until defects are fixed?
That depends on what the contract provides. Some contracts allow a retention or a defects liability holdback; others do not, and withholding without a contractual basis is a breach. If you want the protection of a holdback, it needs to be in the contract before signing rather than asserted at the end of the job.
Get the payment terms right before you sign
The payment schedule is the part of a building contract that causes the most disputes and the easiest to fix in advance. Have it reviewed before the contract is signed.
Progress payments
Advice on payment structures, progress claims and certification under building contracts.
ContinueMonthly progress payments vs stage payments
Which payment structure suits your project, and how to switch an ABIC contract to monthly claims.
ContinueContract review
A full review of the building contract, including the payment schedule, before you commit.
Continue