How much deposit can a builder take? The limits by state

Every builder has done the sums on a new contract and felt their stomach drop. The client signs a $600k build. You’d love to take 20% up front and get rolling. The law says you can’t. Depending on your state, you can take somewhere between 5% and 10%, and only once the insurance is sorted.

That’s not a bad thing. Deposit caps protect homeowners from builders who take the money and vanish. But they also mean the money you spend in the first few weeks of a job, before the base stage is paid, mostly comes out of your own pocket. Know the cap before you quote, and plan for the gap.

Key takeaways

• Deposit caps are law, not a guide. A client agreeing to pay more doesn’t make it legal.
• The common caps: 10% in NSW, 5% on jobs of $20,000 or more in Victoria and Queensland, 6.5% in WA.
• Insurance comes first. In most states you can’t ask for a deposit on a covered job until the home warranty cover is in place.
• The deposit won’t cover your start up costs on most builds. Site set up, the slab and early materials usually cost more than the deposit brings in.
• Have the gap funded before you sign, not when the concrete truck is booked.

What is the deposit limit in each state?

Here’s the short version for residential (domestic) building work. Commercial contracts generally aren’t covered by these caps, so the deposit there is whatever the contract says.

SA, Tasmania, the ACT and the NT have their own rules. If you build there, check with your state building regulator before you send the first invoice.

Why can’t I just take a bigger deposit if the client is happy to pay?

Because the cap protects the client, and the client can’t sign that protection away. Regulators take it seriously. Building and Energy in WA has fined builders for taking more than 6.5%, and Victoria has prosecuted builders for taking deposits above the limit before work started.

There’s a practical sting too. The QBCC says any money paid above the lawful deposit can’t be recovered through a Queensland Home Warranty Scheme deposit claim. So if your business hits trouble, the client loses that money, and you’ve handed the regulator an easy case against you.

The same goes for dressing up a bigger deposit as something else. A “materials payment” or “booking fee” on day one is still money taken before the work is done.

Does insurance have to be in place before I take a deposit?

In most states, yes, once the job is big enough to need cover.

• NSW: For work over $20,000, you need home building compensation cover before you ask for any money, deposit included. Give the client the certificate before they pay.
• Victoria: The new Home Warranty scheme replaced domestic building insurance for eligible work under contracts signed from 1 July 2026, for homes up to three storeys and work over $20,000. The Victorian Government’s Home Warranty page sets out how it works. Under the old rules you had to give the client the policy and certificate before taking a deposit on work over $16,000, so check the Building and Plumbing Commission’s current guidance on timing for new contracts.
• Queensland: The QBCC warns homeowners that paying more than the contract allows, or paying before the due date, can reduce their Queensland Home Warranty Scheme cover. Expect clients (and their lenders) to stick to the schedule.
• WA: Home indemnity insurance is needed for work that needs a building permit and is over $20,000.

Build the insurance into your timeline. If the certificate takes a week, the deposit takes a week, and so does your start.

How far does a 5% or 10% deposit actually go?

Not far. Take a $500k single storey build in Victoria. The deposit cap is 5%, so $25k. The base stage claim is 10% of the contract price under the standard stages, but you only get paid once the slab is down and signed off.

Here’s roughly what goes out the door before that base claim lands:

Those numbers move a lot with site conditions, so treat them as an illustration, not a quote. But the pattern is the same on nearly every job: you’re spending well beyond the deposit before you can make the first claim. Then the base claim has to be approved and paid, which can take another week or two.

If you’re starting two jobs at once, double it. That’s when builders get caught short. If that sounds familiar, check what you could qualify for before the next contract is signed, not after.

Example: a small builder in Ballarat starting a $500k build

Example (invented business, round numbers): A two-person building company in Ballarat signs a $500k contract for a single storey brick veneer home. The contract is over $20,000, so in Victoria the deposit is capped at 5%: $25k.

• Weeks 1 to 2: permits, insurance and site set up. The deposit comes in once the insurance paperwork is done.
• Weeks 3 to 5: site cut, piers, under slab plumbing, steel and the pour. About $70k has gone out, counting wages and the slab subbie.
• Week 6: the base claim of $50k (10%) goes in. The client’s lender sends their valuer and the money arrives in week 7.
• Meanwhile, the frame is ordered and the chippies start.

So the builder is about $45k out of pocket for a few weeks, on top of whatever else is running. They’ve got a decent trade account, but the concreter and the steel supplier want paying on seven day terms.

The fix: before signing, the builder lines up a short term cash flow loan for tradies based on their business bank statements, sized to cover the gap to the base and frame claims. It’s repaid as the claims come in. The job starts on time, the subbies are paid on time, and the builder doesn’t have to beg the client for an early payment they’re not allowed to take anyway.

How do builders fund the gap between the deposit and the first claim?

You’ve got a few options. Most builders use a mix.

1. Your own cash buffer. The cheapest money there is, if you’ve got it. Many builders aim to hold enough to carry one job to the frame stage.
2. Supplier trade terms. Thirty day accounts with your timber, steel and concrete suppliers buy you time. Our guide to buying building materials in bulk covers how to use them well.
3. Unsecured cash flow loans. For businesses trading 6+ months with an ABN. They’re based on your business bank statements and sized to your turnover, and some are approved and funded within hours.
4. A short term loan secured against property you already own. Your home, an investment property or land with equity. No financials needed, bad credit and ATO debts considered, funded in as little as 24 hours once valuation and documents are in, usually over 1 to 12 months. We lend from $20,000 to $5 million for business and investment purposes. Run your numbers through the construction equity calculator to see roughly what’s usable.
5. Working capital for construction companies if you’re running several jobs and the gap never really closes.

One thing we don’t do: lend against the finished value of the build or the progress draws on the job. Security is always property you or a guarantor already own.

How to quote so the deposit cap doesn’t hurt

• Know your state’s cap before you price. Don’t promise a client “a 10% deposit” in Victoria on a $300k job.
• Get the insurance moving the day the client says yes. No certificate, no deposit.
• Map your spend against the stage claims. A one page cash flow for each job shows you exactly how deep the hole gets before the base and frame claims land.
• Check the off-site exceptions. If you’re a cabinet maker or a shed and pergola builder in Queensland, or doing off-site cabinetry in WA, a 20% deposit may be allowed when the off-site work is more than half the job.
• Don’t stack starts. Two slabs in the same month can double the hole. Stagger them if you can.
• Claim on time, every time. Our guide to progress payments and cash flow gaps covers how to get claims paid faster.

Line up the start money before you sign the next contract

A small deposit isn’t a problem. Being caught short at the slab stage is. The builders who sleep at night know their cap, map the spend and have the gap money arranged before the concrete truck is booked.

That’s the bit we help with. We work with small builders and trade businesses every week who’ve just won a job and need the money to get it out of the ground.

Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. Your details go to one lending specialist, not a pile of lenders, so your phone won’t be ringing off the hook with strangers. A real person who understands stage claims and deposit caps looks at your situation and calls you back.

Please fill in the form accurately: how much you need, what it’s for (the job, the contract value and when the first claim is due), how long you’ve been trading and, if you own property, roughly what it’s worth and what’s owed. Straight numbers mean the first option we talk about is one that can actually fund.

Get the job out of the ground →