Paying for work
Don’t be tempted to pay ahead of time. You may end up paying for work that might not get done. By sticking to the payment schedule outlined in your contract, it will help protect you in situations where your builder is unable to finish your job.
The laws surrounding how much you should pay for a deposit and for progress payments are very specific and are outlined below.
Generally, if the cost of your building work is $20,000 or more, the maximum deposit allowed is 5% of the total contract price (including labour, materials and GST). If the contract price is between $3,300 and $19,999, the maximum deposit is 10%.
An exception applies where more than 50% of the value of the work is to be performed offsite (e.g. for kitchen renovations where the modules are custom made in a factory), in which case the contractor is permitted to take up to 20% deposit.
For jobs priced at $3,300 or less, we generally recommend no more than 20%.
For all contracts priced at more than $3,300, the number and timing of progress payments is a matter of negotiation between you and the contractor. However, all progress payments must be related to the amount of work performed on site. For example, the contractor can't claim more than 50% of the contract price, including the deposit, until at least 50% of the work has been completed on site.