Set-Off (Materials Set-Off)
When a builder pays a supplier for materials on your behalf, that cost is set off (deducted) from what you are later paid. Set-off stops you being paid twice for the same materials.
Definition
Set-off in a construction payment is a deduction. When a builder pays a supplier for materials on your behalf, that cost is taken off what you are later paid. The deduction is the set-off.
It is not a penalty and it is not lost money. It stops the same materials being paid for twice: once to the supplier, and again to you.
Why it matters
On a paper-and-email job, set-off is where confusion starts. The builder pays a supplier, you invoice the full amount, and the deposit that lands is smaller than the figure on your invoice. With no clear record of what was deducted or why, that gap feels like a short payment. It is not. The materials were already covered when the builder paid the supplier. Knowing the deduction is coming, and being able to see it itemised, means you quote labour and materials with eyes open and you never chase money for materials you never had to buy.
How it works in practice
Say you win a job worth 40,000 dollars: 30,000 dollars labour and 10,000 dollars materials. You order the materials, but the builder pays the supplier the 10,000 dollars directly so the trade keeps moving.
When your invoice is approved, that 10,000 dollars is set off against your payable. You are still owed the full 40,000 dollars of value. You just receive 30,000 dollars in cash, because the 10,000 dollars of materials was already paid on your behalf.
The deduction is disclosed on the payment record. You see the line item, the amount, and what it relates to, so the maths is never a mystery. Nothing is hidden and nothing is invented.
Set-off only ever covers materials the builder actually paid for on your behalf. It cannot push your net pay below zero, and it does not touch your labour.
Common misconceptions
Set-off means I got short-paid
No. The materials cost was already covered when the builder paid the supplier. You still receive the full value of your work. Cash plus materials paid on your behalf equals your invoice total.
The builder can deduct whatever they like
No. Set-off only covers materials the builder genuinely paid for on your behalf, and every deduction is itemised on the payment record. It cannot be used to claw back labour or to take you below zero.
Set-off delays my payment
No. Set-off is a calculation, not a hold. It changes the cash amount, not the timing. Your payment still releases on the same fixed 7-day clock from invoice approval.
On BuildFair, materials set-off is calculated automatically and shown as a line item on every payment request, and approved subcontractor invoices release on a fixed 7-day clock from invoice approval. Funds stay in regulated custody with BuildFair banking partner Kobble (Kobble operates under AFSL 545391, Yondr Money Pty Ltd) until they are released. This entry is general information, not legal, financial, or tax advice. How subcontractors get paid on Australian residential builds