Should I Pay a Builder Deposit?
Paying a deposit is a normal part of a building contract. The question isn't really whether to pay one, it's how much, when, and what you've checked before the money leaves your account. Get those wrong and the deposit becomes the thing you lose if the builder fails.
Deposits are legal, and they're capped
Each state limits how much deposit a builder can ask for on a residential building contract. In Victoria the cap is 5% of the contract price for contracts of $20,000 or more (10% below that). In New South Wales the maximum is 10%. Queensland sets its own limits under the QBCC's domestic building contract rules. If a builder asks for more than the cap, that's both a legal problem and a warning sign about their cash position. Check the current figure with your state regulator before you pay.
Why the cap exists
The whole point of capping deposits is to stop builders funding their business with homeowners' money before any work is done. A builder who needs a big deposit up front, or wants it before you've had a chance to do any checks, is often a builder under financial pressure. That's exactly the situation the cap is designed to protect you from.
Where your deposit actually goes, and what protects it
A deposit is your money sitting in the builder's account before work starts. If the builder becomes insolvent before they begin, recovering it through the insolvency process is difficult and slow. Domestic building or home warranty insurance offers some protection for non-completion, but it has caps and conditions and shouldn't be treated as a safety net for a risky builder.
Before you pay, do this
Check the builder's finances, licence and history first. Keep the deposit to the legal minimum. Never pay progress payments ahead of work actually completed and inspected. None of this is complicated, but it's the difference between a deposit that buys you a home and a deposit you never see again.
Related: Builder Financial Check
Check the builder before you pay the deposit
Independent financial and background check before any money changes hands. Australia-wide.