Progress Payment Rules for Residential Building Work in Tasmania

What it is

A progress payment is any part of the contract price paid as the job advances. The Residential Building Work Contracts and Dispute Resolution Act 2016 (Tas) defines it as a payment of an amount that is part of the contract price, but not a payment that is, or is in the nature of, a deposit. The distinction matters. Deposits are capped by section 41 and progress payments are governed by section 42, and the two rules do different work.

The only rule: payment follows work on site

Section 42(2) is the whole of Tasmanian progress payment law, and it is one sentence. A building contractor must not demand or receive an amount, other than a deposit, under a residential building work contract unless the amount is directly related to the progress of the performance at the building site of the residential building work to be performed under the contract.

Three things follow. First, nothing beyond the capped deposit can be taken before work starts, because there is no progress for a payment to relate to. Second, the payment must track work actually performed, not time elapsed, not materials ordered and not the builder cash position. Third, the words "at the building site" are deliberate. Section 42(1) excludes from building site any place where work is performed that must later be installed or constructed elsewhere under the contract. Off-site fabrication generates no progress at the site, which is why the Act gives heavily off-site work its own 20 per cent deposit tier instead.

Tasmania prescribes no stage table

This is what surprises builders arriving from the mainland. Tasmania does not legislate stages. There is no base, frame, lock-up and fixing table and no fixed percentage against each stage. CBOS confirms that owners and builders are free to agree the number and timing of progress payments, provided they are clearly stated in the contract and proportionate to the value of work performed.

Victoria is the contrast. Its stage table is prescribed, with base, frame, lock-up and fixing each defined, and the percentage payable fixed by contract type. For a contract to build all stages the client pays 10 per cent at base, 15 per cent at frame, 35 per cent at lock-up and 25 per cent at fixing. New South Wales sits closer to Tasmania and lets a contract use fixed payments on completion of specified stages, payments as work is performed and costs are incurred, or a combination of the two.

The absence of a table is not freedom. It moves the drafting risk onto the builder. In Victoria a builder who follows the table is compliant by construction. In Tasmania every schedule is a bespoke exercise in proving proportionality, and the builder carries the argument when it is challenged.

The half-the-price rule

CBOS puts a number on proportionality that the Act does not. The Residential Building Consumer Guide states that a builder cannot ask the owner to pay more than 50 per cent of the contract price until at least half the work has actually been completed. That figure is a regulator gloss on section 42 rather than a statutory rule, but it is the yardstick CBOS applies and the one a mediation panel will start from.

This is not Security of Payment

Tasmania runs a separate adjudication regime under the Building and Construction Industry Security of Payment Act 2009 (Tas). The two should not be conflated. Section 42 is a consumer protection limiting what a builder may demand from an owner. Security of payment is a rapid recovery mechanism used mainly down the contracting chain. They do interact. The Director of Building Control must reject a notice of dispute under the 2016 Act where the matter is the subject of an adjudication application under the 2009 Act that has not been rejected or withdrawn, or that has been resolved or determined.

What a non-compliant schedule costs

Demanding or receiving a payment that is not directly related to progress at the site is an offence carrying a maximum fine of 800 penalty units for a body corporate and 300 penalty units for an individual. That is the same exposure as an excessive deposit. Proceedings must begin within 12 months after the Director became aware, or ought reasonably to have become aware, of the offence.

Section 78 closes the escape route. A term that front-loads payments in a way that defeats section 42 is void to that extent, and the owner signing it does not save it.