Retention Money in Construction — When and How to Claim It Back

By Cal Crane — founder, TradeControl; Operations Manager, Barzen Projects

Disclosure: Cal Crane is the founder of TradeControl and also Operations Manager at Barzen Projects, where TradeControl is used on live commercial sites. Barzen is not an independent customer; it is where the product is built and tested in the field. Figures shown are from Barzen's real usage and are verifiable.

General information only — not legal advice.

Retention is a percentage of each progress payment withheld under the contract as security for performance and defects. When it comes back is set by your contract — usually keyed to practical completion and the end of the defects liability period — and in some states statutory trust or release rules sit on top.

What retention is

Retention is a percentage of each progress payment withheld under the contract. It exists as security: the party above you in the chain holds part of the money you have earned against the risk that defects emerge or obligations go unperformed. The percentage withheld, the point at which part of it is released, and the point at which the balance comes back are all creatures of your contract — there is no single Australia-wide rule, so the retention and security clauses of each subcontract are the first thing to read.

Retention becomes dead money in one way: nobody claims it. Releases rarely arrive unprompted. If no one in your business owns the release dates, the money sits with the builder long after the entitlement has arisen — and the longer it sits, the harder it is to collect.

Dates to track

For every job on which retention is held, record these dates the moment they are known, and diarise the claims:

  • Practical completion date — many contracts key the first release to it. Get the date in writing when it is certified.
  • End of the defects liability period — commonly the trigger for the final release. If there are multiple or extended defects periods, track the end of each.
  • Contractual release dates — whatever your contract actually says. Put them in a register, not in someone's head.

Then claim on the day the entitlement arises — in writing, referencing the contract clause and the amount.

State rules that sit on top of the contract

In some states, statutory trust or release rules sit on top of whatever your contract says. These do not replace your contractual release dates — they govern how the money is held, or how release claims are processed.

Queensland — project and retention trusts

Under the Building Industry Fairness (Security of Payment) Act 2017 (Qld), project trusts are required where the contract is eligible and there is subcontracting (s 12). The eligibility threshold (s 14) is $1 million or more where the contracting party is the State or a hospital and health service, otherwise $10 million or more (with more than 50% project trust work). Separately, the Act requires a retention trust (s 32) for cash retention withheld under a withholding contract.

NSW — retention trust accounts on projects over $20 million

In NSW, head contractors on projects over $20 million must hold retention money in a trust account with an ADI, under the Building and Construction Industry Security of Payment Regulation 2020. The head contractor must notify within 14 days of opening the account, and must provide the subcontractor a ledger at least quarterly (or as agreed, at minimum six-monthly). Fines of up to $22,000 apply.

WA — retention money trusts

Under Part 4 (ss 69–87) of the Building and Construction Industry (Security of Payment) Act 2021 (WA), retention money must be held on trust. The scheme excludes government-party contracts and contracts under the prescribed threshold (s 70). The threshold was contracts over $1,000,000 including GST from 1 February 2023, dropping to contracts over $20,000 including GST from 1 February 2024 — so on current contracts of any commercial substance, WA retention is trust money.

Victoria — no trust scheme, but a statutory release regime from 15 April 2026

Victoria has no retention trust scheme. Instead, from 15 April 2026 the Building and Construction Industry Security of Payment Act 2002 (Vic) contains a performance-security release regime in the new Division 1A (ss 17A–17H), covering retention and bank guarantees:

  • Performance-security claims and schedules (Division 1A, ss 17A–17H).
  • Deemed release due dates (s 12(1A)).
  • Release timing capped at 20 business days (s 12(1B)).
  • Adjudication of release disputes (s 18A).
  • Earliest performance-security claim: at least 20 business days after the end of the relevant defects liability period (s 17B).

The paperwork that wins these arguments

The paperwork that wins these arguments is made on the day, not assembled when the defects liability period ends. Signed day dockets, logged site issues, completed site forms and scope queries answered against your actual SOW are what stand behind a clean final account — and a clean final account is what gets retention released without a fight. TradeControl's Day Dockets, Site Issues, Site Forms and SOW scope queries build that record as the work happens — see the full feature set.

Related

Sources

If retention is being withheld past its release date, or you are unsure whether a trust or release regime applies to your contract, speak to a construction lawyer before you act — the right move depends on your contract, your state and your facts.

TradeControl provides commercial support tools only. It does not provide legal advice.