Progress payment

A staged partial payment of a building contract, made when the build reaches a defined milestone. The payment structure used in almost all Australian residential building contracts.

Definition

A progress payment is a partial payment of the total contract price, paid when the build reaches a defined physical milestone. Most Australian residential building contracts use a 5-stage or 6-stage progress payment schedule: deposit, base, frame, lock-up, fixing, and practical completion.

Why it matters

Progress payments are the financial backbone of every Australian residential build. They determine how much money the owner pays at each stage, how the builder funds the build between stages, and where the risk sits when something goes wrong. Most owners encounter the term for the first time when reviewing a building contract and don't fully understand the implications until something goes wrong mid-build.

How it works in practice

When the builder reaches a stage in the build, they issue a progress claim to the owner (or to the bank if the build is funded by a construction loan). The progress claim is an invoice for the next stage payment, accompanied by some form of evidence that the stage has been reached. The owner or bank reviews the claim and either pays it or disputes it within a defined window (typically 14 days under most contracts).

If paid, the funds go into the builder's general operating account. The funds are not held in trust, are not ringfenced for the trades who did the work on that stage, and can be used by the builder for any project or business purpose.

The standard percentages vary by contract and by state, but a representative split is: deposit 5-10%, base 10-15%, frame 15-25%, lock-up 15-20%, fixing 20-25%, practical completion 10-20%.

Common misconceptions

Progress payments are held in trust

They aren't, in standard Australian residential contracts. Owner funds become the builder's funds the moment they're paid.

A progress claim is the same as an invoice

Not under the Security of Payment Act. A progress claim with the right wording becomes a payment claim under the Act, which triggers specific legal protections for subcontractors and suppliers. A standard invoice without that wording does not.

The percentages are fixed

Some are capped by state legislation (Victoria caps deposits at 5% for new homes, for example), but most are negotiable at contract signing within industry-standard ranges.

For the full structure, see the How progress payments work in Australian residential construction pillar.