Progress Payment Schedule

Understanding Progress Payments

Progress payments allow a builder to invoice a client at specific stages of a construction project rather than waiting for the entire job to finish. Instead of funding all materials and labour upfront and waiting months for payment, you receive payment as the work reaches practical completion at defined milestones. This structure is essential for maintaining a healthy business and ensuring you can meet your obligations as they fall due.

Improving Cash Flow

For Australian tradespeople and small builders, cash flow is often the biggest challenge. Progress payments bridge the gap between your outgoings and income. Under standard contracts, you likely need to pay suppliers and subcontractors monthly or upon delivery of materials. Without progress claims, you effectively act as a bank for your client, funding the entire build until handover. By claiming payments at stages like the completion of the frame, lock-up, or fixing stages, you recoup costs and pay your own bills on time. This prevents the need to use high-interest overdrafts or external finance to keep the site running.

Managing Risk

Progress payments significantly reduce financial risk. If a dispute arises or a client defaults on payments, you have only completed the work corresponding to the last paid milestone. This limits your exposure to unpaid labour and materials. If you wait until the end of the project to invoice, you risk losing the total value of the contract if the client cannot pay.

Legislative Framework

In Australia, the rules for progress payments are strict and governed by state-based security of payment laws. These regulations ensure builders have the right to be paid for work they have completed.

• Security of Payment Acts: Each state and territory has its own Act, such as the Building and Construction Industry Security of Payment Act 1999 (NSW), the Building Industry Fairness (Security of Payment) Act 2017 (QLD), and the Building and Construction Industry Security of Payment Act 2002 (VIC). These laws give you the right to make a progress claim and provide a rapid dispute resolution process if a client fails to pay on time.
• Residential Building Contracts: For residential work, you must adhere to specific regulations like the Domestic Building Contracts Act 1995 (VIC) or the Home Building Act 1989 (NSW). These laws dictate the maximum deposit you can request and often mandate the specific stages at which you can claim progress payments.
• Standards: The HIA NSW Residential Building Contract and Master Builders Association (MBA) standard contracts include predefined progress payment schedules. Using these contracts helps ensure your payment terms are legally compliant and clearly understood by the client.

To protect your cash flow, ensure your progress claims are submitted correctly according to the contractual timeframes and include all necessary documentation, such as valid invoices and statutory declarations.

New South Wales In NSW, the Home Building Act 1989 sets strict rules for progress payments. Residential building work valued over $20,000 requires a written contract with a specific progress payment schedule. While the legislation allows for flexible stages, you must only claim for work that has actually been completed. The maximum deposit for residential work is 10%. For projects costing $20,000 or less, the maximum deposit is 10% or $2,000, whichever is less. Final payment cannot be demanded until the occupation certificate is issued or the work is practically complete.

Victoria Victorian builders operate under the Domestic Building Contracts Act 1995 and the Building Act 1993. This legislation prescribes a fixed payment schedule for projects valued over $16,000. You must use the following five stages. The base stage is 10%, the frame stage is 15%, lock-up is 35%, fixing is 20%, and completion is 20%. You can only claim the deposit if the owner signs the contract and you provide a copy of the Certificate of Currency for home warranty insurance. The maximum deposit is 10%.

Queensland The Queensland Building and Construction Commission Act 1991 regulates progress payments in Queensland. For jobs valued over $3,300 but less $20,000, a fixed deposit of 10% applies. For projects over $20,000, the maximum deposit is strictly capped at 5%. QBCC contracts suggest a stage payment schedule, but you and the owner can agree on custom stages. However, each stage must relate to a specific part of the work, such as the base stage, frame stage, or practical completion.

South Australia South Australian builders must adhere to the Building Work Contractors Act 1995. This Act sets out a mandatory progress payment schedule for all domestic building work over $12,000. The standard schedule is a 10% deposit, followed by payments at the footing stage, frame stage, enclosing stage, fixing stage, and practical completion. The final payment is due at the practical completion of the work.

Western Australia In Western Australia, the Building Services (Registration) Act 2011 governs these transactions. The maximum deposit you can request is 6.5% of the total contract price. The WA Builders Registration Board provides a standard progress payment schedule. Commonly accepted stages include the deposit, base stage, frame stage, enclosed stage, fixing stage, and completion. You must ensure your contract clearly defines when each stage is complete to avoid disputes.

Consumer Protections Regardless of the state, the Australian Consumer Law implies guarantees into all residential building contracts. This means the work must be carried out with due care and skill. If you structure your progress payments incorrectly or demand payments for incomplete work, you risk breaching state licensing laws and facing penalties from the relevant consumer affairs body.

Clearly defining construction stages within your Progress Payment Schedule is essential for a smooth working relationship. Ambiguity in these descriptions often leads to disputes over money and delays. You must describe exactly what work is included in each stage so both parties know when a payment is due and payable.

Use standard industry benchmarks to structure your schedule. For residential building work in New South Wales, Queensland, and Victoria, you are generally restricted to a maximum number of stages. In NSW, for example, the Home Building Act 1989 limits standard contracts to five stages. Even where legislation is less prescriptive, sticking to common stages reduces confusion.

Write precise, task-based descriptions for every stage. Do not use vague terms like "commencement" or "completion" without defining what they actually look like on site.

Base Stage Do not simply write "base work done". You must list the specific physical tasks required. A clear description should read: "Site excavation and removal of spoil, installation of timber or steel sub-floor, stumps, piers or concrete footings, and the placement of concrete slabs on ground." This confirms the payment is triggered only after the concrete is poured or the sub-floor is fully installed, not just when the dirt is turned.

Frame Stage This stage is a primary inspection point under the National Construction Code. A weak description causes arguments about whether the frame is "finished". Your description must be: "Delivery and erection of the primary structural frame, including roof trusses, wall framing, and floor framing. This includes all bracing and temporary supports." Referencing the Australian Standards for timber framing (AS 1684) or steel framing (AS 3623) helps clarify that the frame must be structurally sound and inspected before payment is released.

Lock-up Stage "Lock-up" is a common trigger for a large payment, so it is a frequent point of disagreement. Do not rely on the word "lock-up" alone. Define it physically: "Installation of external doors and windows, fixing of external cladding, and installation of garage doors to the point where the building can be securely locked." Specify if flyscreens or security doors are excluded. This definition prevents the builder from demanding payment before windows are installed, or the owner refusing payment because a security screen is missing.

Other standard stages include Enclosed (when walls are lined and weatherproof), Fixing (architraves, doors, skirtings, cupboards), and Practical Completion (the home is ready for occupation).

Using these specific descriptions protects you under the Security of Payment Act laws in various states. If a dispute arises to an adjudicator or tribunal, they will look at your written definitions. Clear descriptions make it obvious whether the work has reached the required standard for payment.

Allocating the Total Contract Value

To build a compliant progress payment schedule, you must allocate the total contract price across specific stages. These stages should reflect the actual value of the work completed and the materials fixed to the site at that point in time. Do not split the total price evenly. Instead, calculate the percentage for each stage based on the real cost of the labour and materials involved.

For example, if the total contract price is $50,000 and the initial 'Site Preparation and Base Stage' involves $10,000 worth of work and materials, that stage represents 20 percent of the contract. You must invoice for 20 percent of the total price upon completion of that stage. This method ensures the client is only paying for value that has been genuinely added to the project.

If you intend to charge for materials upfront, you must specify this separately in the deposit section of your contract. Under the Home Building Act 1989 (NSW) and similar legislation in other states and territories, the maximum deposit is generally limited to 10 percent. You cannot hide the cost of materials within the early progress payment stages to get around this cap. All materials supplied before the first progress payment must be clearly listed as part of the deposit calculation, not as Stage 1.

Avoiding Front-Loading

Front-loading occurs when you schedule the bulk of the payment in the early stages of the project, well before the equivalent value of work has been completed. This creates a significant financial risk for the client and is often viewed unfavourably by dispute resolution bodies.

Australian consumer protection laws, such as the Australian Consumer Law (within the Competition and Consumer Act 2010), require contracts to be fair and transparent. A schedule that demands 60 percent of the total price for work that only represents 20 percent of the build cost may be considered unfair. If a dispute arises, regulators or tribunals like the NSW Civil and Administrative Tribunal (NCAT) or Victorian Civil and Administrative Tribunal (VCAT) may assess your payment claim against the actual work completed.

To stay compliant, keep your payment milestones proportional to the physical progress on site. A standard approach involves smaller percentages in the early stages, larger percentages during the framing and fixing stages where costs are highest, and a smaller percentage for the final completion. Ensure the final progress payment is substantial enough to cover the cost of returning to the site to address minor defects, ensuring the client has to secure the finished job.

Issuing the Invoice

Once you complete a specific stage of work listed in your Progress Payment Schedule, you must issue a tax invoice to the client immediately. Do not wait for the end of the month or a specific payment run date. The invoice needs to be clear, accurate, and contain specific mandatory details to be legally valid under Australian Taxation Office (ATO) requirements. It must state the words 'Tax Invoice', your Australian Business Number (ABN), the client's details, a brief description of the work completed for that stage, the date of issue, and the total amount payable.

Attach the detailed claim documentation to this invoice. Sending just a dollar figure is not enough. You must show exactly how you calculated the claim. This includes the value of the stage completed, any adjustments for variations, and any previous amounts paid. In residential building work where the contract price exceeds $20,000, the Building Industry Fairness (Security of Payment) Act 2017 (NSW) or similar legislation in other states like the Building Industry Fairness Act 2017 (QLD) requires a specific format for these claims, often called a Payment Claim.

Notice and Documentation Requirements

Providing proper notice and supporting documents is critical to protecting your right to payment. Under the Security of Payment laws, a valid claim must describe the construction work or related goods and services to which the progress payment relates. It must also indicate the amount claimed.

You must serve this claim correctly. Check your contract to see if it specifies a method of service, such as registered post, email to a specific address, or personal delivery. If the contract is silent, use a method that guarantees proof of delivery. For Queensland builders, the claim must strictly follow the formatting requirements set out in the regulated forms.

Supporting documentation serves as evidence that the work is actually done. This should include site inspection reports, material delivery dockets, or photos showing the completed stage. This level of detail reduces the likelihood of disputes. If a client believes you have not reached the milestone, they may withhold payment. However, if you provide clear proof that the stage is practical and complete, you have a strong legal position to demand payment.

Failure to provide the correct notice or a compliant claim can delay your payment by weeks. In some jurisdictions, an invalid claim might not even trigger the payment timeframes, leaving you out of pocket for materials and labour. Always keep copies of every invoice, claim, and supporting document sent to the client.