Deposit Limits for Residential Building Work in Tasmania

What it is

A deposit is money a Tasmanian builder takes before starting residential building work. The Residential Building Work Contracts and Dispute Resolution Act 2016 (Tas) treats it as a distinct class of payment and caps it against the contract price. Section 4 defines it broadly. A deposit includes any payment for residential building work demanded or received by the building contractor before the work begins to be performed. Rebadging an up-front payment as a mobilisation fee or a commitment payment does not move it outside the cap.

The cap carries more weight in Tasmania than in any other state, because Tasmania has no compulsory home warranty insurance. If a builder takes the money and fails, no insurer stands behind the deposit. The cap is the protection.

The three caps

Section 41(2) sets three maximum deposits, each keyed to a defined set amount:

• 5 per cent of the contract price where the price is equal to or more than the set amount
• 10 per cent where the price is less than the set amount
• 20 per cent where the value of the off-site work is more than half the contract price

The 20 per cent tier exists for prefabricated and kit homes. Off-site work means work done somewhere other than the place the finished thing is finally installed or constructed, so a builder who fabricates most of a dwelling in a warehouse carries real cost before anything reaches the site. For a cost-plus contract, the estimated amount stands in for the contract price.

Where the $50,000 line comes from

Section 41(1) does not carry the number itself. It defines the set amount as the amount, above $20,000, prescribed by regulation, and falls back to $20,000 if nothing is prescribed. Something is prescribed. Regulation 6 of the Residential Building Work Contracts and Dispute Resolution Regulations 2016 (Tas) (S.R. 2016 No. 89) fixes the set amount at $50,000, and has done since the Act commenced on 1 January 2017. Regulation 6 has never been amended.

So the boundary sits at $50,000 as a matter of law:

• 10 per cent for contracts of $20,000 up to $50,000
• 5 per cent for contracts of $50,000 or more
• 20 per cent where more than half the work by value is off-site

Consumer, Building and Occupational Services publishes the same three figures in the Residential Building Consumer Guide that every builder must hand over before the contract is signed. They match because the guide is reporting the regulation, not adding to it. Section 41 read without regulation 6 puts the line in the wrong place, which is the trap: the 10 per cent tier is not dead wording, it is the live rule for the $20,000 to $50,000 band.

Below $20,000 nothing applies

Section 9(a) is the provision most people miss. The Act does not apply at all to residential building work performed for a contract price of less than $20,000. Not the deposit cap, not the written contract rule, not the statutory warranties, not the cooling-off right. A $15,000 bathroom renovation sits outside the entire scheme, and the Australian Consumer Law is what remains.

The penalty

Demanding or receiving a deposit above the cap is an offence carrying a maximum fine of 800 penalty units for a body corporate and 300 penalty units for an individual. Proceedings must begin within 12 months after the Director of Building Control became aware, or ought reasonably to have become aware, of the offence.

There is a second consequence builders rarely price in. Tasmania runs a Financial Assistance Package that pays consumers whose builder has died, disappeared or become insolvent. Where work had not started, it limits the payment to 5 per cent of contract value, on the footing that this matches existing statutory protection. An owner who handed over 15 per cent recovers 5.

How Tasmania compares

Victoria runs the same inverted structure on a different number. Deposits there are capped at 10 per cent below $20,000 and 5 per cent at $20,000 or more, so the bigger the job the smaller the proportion. New South Wales is flatter and caps deposits at 10 per cent for small jobs and large jobs alike. Western Australia sits between them at 6.5 per cent of the total cost of the work before commencement, and unlike Tasmania it backs the money with compulsory home indemnity insurance covering loss of deposit up to $40,000.

Of the four, only Tasmania adds an off-site tier, and only Tasmania leaves the owner with no insurance behind the money. That is the point worth carrying away. In every other state the deposit cap is one of two protections. In Tasmania it is the only one.