Building deposits: $10,000 or 10%?

Members are reminded that the $10,000 deposit figure in the contract guide refers to the maximum deposit protection available, rather than a legal maximum deposit in the ACT. While a 10% deposit is common industry practice, it is not a statutory requirement. For a $500,000 contract, a $50,000 deposit leaves $40,000 outside the deposit protection limit, subject to the applicable cover terms.

To manage material costs and cash flow, consider agreeing on a deposit of no more than $10,000 and tailoring the remaining payments to the project:

• Use Option 1 in the stage payments to create realistic milestones, with payments reflecting the value of work completed.
• Where advance payments are needed for windows, or other materials, use appropriately drafted special conditions identifying the items, amounts, payment triggers and supporting supplier documentation.
• Ensure material payments are credited against the contract price and subsequent claims.

These arrangements do not increase Fidelity Fund protection. Payments made before work begins may still be treated as deposits, regardless of their description in the contract.

We recommend providing the homeowner with the Fidelity Fund certificate before accepting a deposit. Where cover is required, it must be in place before the commencement notice is issued and building work starts.

If you’d like support reviewing your processes, please reach out to the MBA ACT team.

📞 (02) 6175 5900
📧 workplace@mba.org.au