Deposit Limits for Residential Building Contracts in Victoria

What it is

Victoria caps the money a builder can take before starting work by contract price. Above $20,000 the cap is 5 per cent. Below $20,000 the cap is 10 per cent. The rule is section 11 of the Domestic Building Contracts Act 1995 (Vic), and it applies to every domestic building contract, not only to major domestic building contracts.

That last point matters. The section 31 formalities kick in above $10,000. Section 11 is broader. A $9,000 kitchen refresh contract still lives inside the deposit cap.

The section 11 split

Section 11(1) says a builder must not demand or receive an amount as a deposit under a domestic building contract that is more than the deposit limit. Section 11(2) fixes the deposit limit as 5 per cent of the contract price if the price is $20,000 or more, and 10 per cent of the contract price if the price is less than $20,000.

A contract sitting on the $20,000 boundary is at or above $20,000, so it lands on the 5 per cent side. Both figures are GST inclusive because the Act treats contract price as the total amount payable under the contract.

The penalty for a breach is 100 penalty units.

It applies to every domestic building contract

Consumer Affairs Victoria puts this without qualification. The section 11 deposit rule applies to all domestic building contracts, not just major domestic building contracts. Section 3 of the Act defines domestic building work broadly, taking in construction, renovation, extension and demolition of a home together with associated site work.

There are only two carve-outs of practical significance. Owner-builder work under a private arrangement is outside the Act. Work for a public body under a section 6 exemption sits outside too. Every other builder-to-owner arrangement is caught, from a $6,000 pergola contract to a $2 million knock-down-rebuild.

What counts as a deposit

The Act defines deposit as the amount payable under the contract before the work starts. That is deliberately wide. It captures money labelled as a deposit. It also captures money labelled as an early payment, mobilisation charge, colour selection fee or contract preparation charge if the effect is to shift funds before work begins.

Third-party costs paid on the owner's behalf, such as a permit fee or an engineering report ordered before contract, sit outside the cap only where they are treated separately in the contract and receipted at cost. Rolling them into a "deposit" line is precisely what section 11 is designed to prevent.

The owner's remedy for breach

The owner has three routes on a section 11 breach.

The first is refund. A court may order a refund of the excess demanded or received.

The second is avoidance. Section 11(4) lets the owner avoid the contract at any time before it is completed. VCAT has a residual discretion to refuse where it would be unfair in the circumstances, but the default is that the contract falls away.

The third is prosecution by Consumer Affairs Victoria in the Magistrates Court under section 11(1). A conviction generally sits alongside the refund order rather than replacing it.

What the pending Amendment Act does

The Domestic Building Contracts Amendment Act 2025 (Vic) passed on 11 September 2025 and commences on a day to be proclaimed, no later than 1 December 2026. Once in force it moves the deposit rule out of section 11 and into regulations, with a proportionality principle: the deposit for any contract must be no more than a fair and reasonable proportion of the work at the point payment is due.

That is a policy shift, not a mechanical one. The current $20,000 boundary and the current 5 per cent and 10 per cent figures remain the operative limits until the amendment commences and the new regulations are made. A builder pricing a $250,000 kitchen renovation today is subject to 5 per cent, no matter what the regulations eventually adopt.

How Victoria compares

• NSW: flat 10 per cent under section 8 of the Home Building Act 1989 (NSW), regardless of contract value.
• QLD: 10 per cent below $20,000 and 5 per cent at or above $20,000. The cap lifts to 20 per cent where more than half the contract value is off-site work, under Schedule 1B section 33 of the Queensland Building and Construction Commission Act 1991 (Qld).
• WA: 6.5 per cent under section 10(1)(a) of the Home Building Contracts Act 1991 (WA).
• SA: $1,000 where the contract price is $20,000 or less; 5 per cent where the price is more than $20,000.
• TAS: 10 per cent below $50,000 and 5 per cent at or above $50,000.
• ACT: no statutory cap on the deposit for a residential building contract.
• NT: 5 per cent.

Victoria and Queensland share the same 5 and 10 per cent split at the same $20,000 line, which reads as familiar to a builder crossing the border. The Queensland twist is the 20 per cent off-site uplift. Victoria has no equivalent. A prefabricated wall panel arriving on site in Melbourne still sits under the 5 per cent cap for a contract above $20,000.