What is a stage payment?

The contract schedule names each stage and its percentage of the contract sum. When a stage is finished the builder submits a progress claim with a tax invoice and dated photos. The work is then checked, by you, a contract administrator or an independent certifier, and where the contract requires it a payment certificate is issued confirming the stage is complete and the amount payable.

The contract also sets the payment window, often a set number of days after a valid claim or certification. If a construction loan is funding the build, the lender releases its share once its own inspector reports, paying either into your construction account or straight to the builder. A retention amount may be withheld until practical completion or until defects are rectified.

A standard residential build runs through six to eight stages: deposit, slab or base, frame, lock-up, fixing or fit-out, practical completion and final handover. The deposit is usually the smallest slice, the middle stages carry the bulk of the contract sum, and only a small balance is left for completion and handover.

The exact split varies by builder, contract size and project type, and renovations often look different from new builds. Some contracts add intermediate stages such as roof or external cladding. Whatever the split, it has to be written into the contract.

State rules cap the deposit on domestic building work: 5 per cent in Victoria and Queensland above the contract price threshold, 6.5 per cent in Western Australia and 10 per cent in New South Wales. Some states, Victoria in particular, also cap the stage payments themselves, not just the deposit, so check your state fair trading guidance.

You can withhold where the contract allows it, or where you have clear evidence the stage was not completed to the contract standard, but respond in writing with what you propose to pay and why. The state Security of Payment regimes, with their payment schedules, fast adjudication and strict timeframes, cover commercial work, developers and subcontractor claims, and exclude owner occupiers in most states. For your own home the path is your contract's own dispute clause, then your state building disputes body: Domestic Building Dispute Resolution Victoria, NSW Fair Trading or the QBCC.

Where the regime applies, wrongful withholding is expensive: adjudication can enforce payment plus interest and costs. Unpaid subcontractors have their own remedies, including adjudication under the state Security of Payment regime and, in Queensland, a subcontractors' charge, and suppliers can stop work. Retention serves the same protective purpose from the other side, commonly around five per cent, released in two parts: some at practical completion and the rest after the defects liability period.