Deposit (residential building contract)
Deposit is the initial payment at residential contract signing. State legislation caps the maximum: 10% NSW, 5%-10% VIC, 5%-20% QLD by tier. Builder primer.
Ask Chalkline about this →A deposit on a residential building contract is the initial payment the client makes to the builder at contract signing, before construction commences. State home-building legislation caps the maximum deposit amount as a consumer protection: large deposits expose clients to losses if the builder fails to start work.
State deposit caps:
| State | Max deposit | Source |
|---|---|---|
| NSW | 10% of contract price | Home Building Act 1989 s 8 |
| VIC | 5% if contract over $20,000 (registered builder); 10% otherwise | Domestic Building Contracts Act 1995 (Vic) s 11 |
| QLD | 5% of contract price (Level 2 contracts over $20K); 20% (Level 1 contracts $3.3K-$20K) | QBCC Act Schedule 1B |
| SA | Typically 5%; check Building Work Contractors Act 1995 (SA) | State legislation |
| WA | Typically 6.5%; check Home Building Contracts Act 1991 (WA) | State legislation |
| TAS, ACT, NT | Each has its own Act; confirm before quoting | State-specific |
A deposit demanded above the state cap is a regulatory breach by the builder. Clients can demand the excess be refunded; the builder may face licensing or prosecution consequences.
Distinct from other “deposits”:
- Tender deposit: a small refundable payment a client makes when submitting a tender response, returned if the tender isn’t accepted. Different concept; doesn’t go through the home-building Act.
- Holding deposit: an informal payment made before a formal contract to “hold” a slot in the builder’s schedule. Not regulated as a contract deposit. Strictly speaking, no formal contract exists until signed, so a holding deposit is not a building-contract deposit.
- Deposit-on-design-fees: a payment for design work under a separate design contract. Not a building-contract deposit.
Distinguishing deposit from progress claim 1. The deposit is what’s paid at contract signing. The first progress claim (typically “base/slab” at 10-15% of contract) is paid at the first construction milestone. Both are typically required before the slab is poured, but they are separate amounts and separately governed.
Deposit holding and refund.
- Cooling-off rescission: if the client cools off (within the statutory window after receipt of the signed contract), the deposit is refundable, less a statutory retention. The retention amount differs by state ($100 + reasonable out-of-pocket expenses is the common pattern under HBA-style legislation).
- Builder default to start: if the builder takes the deposit then fails to commence work, the home warranty insurance scheme typically covers the deposit recovery.
- Client default: if the client breaches the contract before construction starts, the builder may retain the deposit subject to the contract’s specific damages clause.
Trust account treatment. Some states require deposits to be held in a trust account rather than the builder’s general operating account, until specific milestones are met. VIC was historically the strongest on this; check the current state regulation for trust-account requirements.
For builders.
- Don’t take a deposit above the cap. The premium of a few percent is not worth the regulatory and reputational risk.
- Issue the deposit invoice only after the contract is signed and the home warranty certificate is in the client’s hand. Issuing before the cert is a separate breach.
- Document deposit receipt clearly: amount, date, contract reference, balance owing. Most contract management software auto-generates this.
Also known as: contract deposit, initial deposit, signing deposit.
Category: Contracts / consumer protection / payment.
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Last updated: 2026-05-14. Verified: 2026-05-14.