Deposits & Progress Payments

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It is important to know your rights and requirements when it comes to paying deposits and progress payments.

Deposits

Schedule 1B of the QBCC Act 1994 sets out maximum deposit percentages that must not be exceeded. If the contract for domestic building work is priced at $20,000 or more, the maximum deposit is 5%. The maximum deposit allowed is:

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

Progress payments

Milestone and time-related Payment Claims are allowed for in the Contract and the contractor will submit to you a Payment Claim for the payment. Payment should only be made to the person or company whose name appears on the contract. Payments should only be made at those time nominated in your contract.

Practical completion is when the works are completed in accordance with the contract and all relevant statutory requirements have been met (with the exception of minor defects or minor omissions). At this time, your new home or renovation should be reasonably suitable for habitation and ready for you to begin preparations for moving in.

Security & holding accounts

Security accounts

Your building contract may contain a provision to use a security account for monies which are not subject to a loan approval from a financial institution. There are a number of ways to achieve this security of payment:

  • Deposit contract monies into the Master Builders Holding Account
  • Open a joint account
  • Obtain an unconditional bank guarantee.

Holding accounts

As well as being used as a security account, Master Builders holding account is also used when there is a monetary dispute between parties where a building contract is in place.

The primary purpose of the account is to hold the disputed amount of money in trust until the matters are resolved and it can be used in the following instances:

  • A building contract contains a condition that a security for costs be deposited for arbitration as nominated by the President of Master Builders
  • There is a current dispute on file
  • A court or tribunal order states specifically that the money is to be paid into the Master Builders holding account
  • A building contract contains a condition that disputed amounts may be paid into the Master Builders holding account
  • There is a direction from an arbitrator
  • There is a decision from an adjudicator appointed under the Building and Construction Industry Payments Act 2004
  • A Master Builders member utilises the Master Builders Holding Account in the administration of the building contract (e.g. a security of payment provision).

 

If you would like more information on how to account for progress payments and how to increase your businesses cash flow using deposits and progress payments, call us today.