Key Takeaways
- Retention is released in two stages under most contracts, half when Practical Completion is certified and the other half when the Defects Liability Period ends and notified defects are rectified.
- Serve a payment claim for retention only after the contract says the money is due, because a claim served before the entitlement arises fails at adjudication.
- A final payment claim in Queensland must generally be served within 28 days after the end of the last Defects Liability Period, so waiting can close the statutory path.
- In Queensland, failing to release retention in accordance with the contract without reasonable excuse is an offence carrying up to 200 penalty units or one year’s imprisonment.
Do not sit on released retention. Contractors who let released retention sit unclaimed for a year or two can find the statutory path has closed behind them, leaving only a slower contract debt claim. Work out your dates before you do anything else.
Retention Is Released in Two Stages
Most contracts split the release into two halves with different triggers, and you need to identify both. The first half is usually released when Practical Completion is certified, reducing the security held from 5 percent to 2.5 percent of the contract sum. The second half is released when the Defects Liability Period ends and any defects notified during that period have been rectified, or in some contracts when the Final Certificate issues, which can fall months later.
Read more about What is the Defects Liability Period (DLP) if you’re not sure how it commonly applies in Australia.
AS 4000:2025 shows how tightly a well-drafted regime runs. Under clause 5.4, the Principal’s entitlement to security reduces on the issue of the Certificate of Practical Completion by the percentage stated in the Annexure, and the reduction must be released within 14 days. The remaining entitlement ceases 14 days after the issue of the Final Certificate, with release to follow as soon as practicable, and clause 5.3 lets you substitute another form of security, such as a bank guarantee, at any time. If your contract is an amended AS 4000 or a tailored contract, compare its release clause against that baseline, because the amendments are where the delays get drafted in.
While you are in the release clause, check whether the Defects Liability Period restarts for rectified work. A fresh period runs for the rectified work only, and the trap arises where the contract ties final release to Final Completion, because rolling rectification periods push Final Completion out. If your contract pairs an Evergreen DLP clause with a Final Completion or Final Certificate trigger, get advice before the next rectification notice restarts the cycle.
The easiest retention to recover is the retention you managed from day one, and the habits that make recovery easy, from negotiating the rate and the triggers at tender stage through to the trust account checks during the job, are covered on our Retention Money page. This guide picks up at the point where the money is already overdue.
Start With the Contract, Not the Act
When retention is overdue, read the release clause before you write to anyone, because every demand you make will be tested against it. Identify the exact trigger for each half of the retention, which certificate or event each trigger requires, and whose completion each trigger refers to.
If you are a Subcontractor, the whose-completion question matters most. A clause tying your release to Practical Completion of the whole Project, rather than your own Works, operates as a pay-when-paid style provision, and provisions of that kind are void under the Security of Payment legislation in every state. The High Court confirmed in Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 that a retention release clause dependent on a certificate issuing under the head contract arrangements was a void pay-when-paid provision.
In Queensland, also check that the amount being held is even lawful, because retention and security combined generally cannot exceed 5 percent of the contract price before Practical Completion or 2.5 percent after it, with the detail covered on our Retention Money page. Where the holder is over the cap, the excess is being withheld unlawfully, and that becomes a powerful opening position in any release conversation.
Prove the Trigger Has Occurred
Gather the documents that prove your entitlement for each release. You want the Certificate of Practical Completion with its date, the Defects Liability Period expiry date calculated from it, the defects list, and evidence of where rectification stands. If the contract requires a certificate to trigger either release and none has been issued, request it in writing now, because a missing certificate is the most common excuse for silence.
If you are still in the process of fixing up defects, the retention money release clauses may not yet have kicked into effect. Check the wording carefully, because some contracts release the second half on the expiry of the Defects Liability Period while others hold it until every notified defect has been rectified, and the difference decides whether you can demand the money today.
Working out whether a defect has been rectified properly is a contract question, and the answer sits in your defects clause. Some clauses require rectification to the standard set by the contract documents, some require the Superintendent to direct and then certify the rectification, and some are silent, which leaves your general obligation to comply with the contract doing the work. If the holder keeps rejecting your rectification and you cannot tell whether you have met the contract standard, that is exactly the kind of clause-level question Rachelle answers under a Fixed-Price Quote.
Where you dispute that a defect is yours at all and the Principal does not agree, understand that the disagreement itself can hold the retention in place, and you may need to commence the dispute resolution process under the contract to get to a point where the retention money can be released. Weigh that path against the cost of simply doing the disputed work, because for minor items the rectification is often cheaper than the fight.
Ask in Writing and Keep Talking
Write to the Principal or the Contractor holding the money before you escalate. State the clause, the trigger event, the date it occurred, the amount held and the date payment is required, and attach the certificate or the expiry calculation. A letter that points to the exact clause and the exact date gets paid far more often than a general demand, and it becomes useful evidence if you end up at adjudication. Keep copies of everything you send and receive, because the correspondence trail decides adjudications.
A phone call to your contact before or alongside the letter is usually worth making, because plenty of retention gets released once someone senior realises the withholding has no certified basis. One negotiation position worth putting early is release of the undisputed portion, because even where defects are genuinely in contest, the balance of the retention above any honest estimate of the rectification cost has no reason to stay held. Keep talking while the conversation is productive, and keep the statutory clock in view while you do, because the time limits for serving a payment claim keep running through any negotiation.
Enforce Under the Security of Payment Act
Once the contract says the money is due and the holder still will not pay, include the retention in a payment claim under the Act in your state. The provisions are s 13 in New South Wales, ss 68 and 75 of the Building Industry Fairness (Security of Payment) Act 2017 in Queensland, s 14 in Victoria, and s 22 of the 2021 Act in Western Australia for contracts entered into from 1 August 2022. Victorian Contractors had years of uncertainty on whether retention could be claimed this way, and the Court of Appeal resolved it in the Contractor’s favour in J.G. King Project Management Pty Ltd v Hunters Green Retirement Living Pty Ltd [2024] VSCA 310.
The claim itself must identify the work or the goods and services the payment relates to, state the amount you claim, and request payment. New South Wales, Victoria and Western Australia also require the claim to state that it is made under the relevant Act, while Queensland dropped the endorsement requirement and treats a document bearing the word invoice as a request for payment. If you are a Head Contractor claiming from a Principal in Queensland, your payment claim must also include a supporting statement confirming whether your Subcontractors have been paid, and a claim without one is exposed to challenge. Our Construction Contract Payment guide sets out the exact endorsement wording state by state.
The respondent must then serve a payment schedule within the strict statutory timeframe. Silence within that window converts the claimed amount into a statutory debt you can recover in court, and a schedule for a lesser amount sends the dispute to adjudication on a fast timetable. Check the schedules you have already received on the Project, because a respondent who never certified an intention to withhold your retention holds a weak hand at adjudication.
Beyond the payment claim path, Queensland gives you further levers. You can suspend work on 2 business days notice where the Act permits it, lodge a free monies owed complaint or a notification of offence with the QBCC against a licensee, register a subcontractors’ charge, and after a favourable adjudication decision you can lodge a payment withholding request up the chain or a charge over property. Each lever has strict preconditions and some carry real consequences if used without an entitlement, so take advice before pulling any of them.
Watch the Time Limits
The statutory path does not stay open forever. In Queensland, a payment claim for a final payment must be served before the longest of the period allowed under your contract, 28 days after the end of the last Defects Liability Period, or 6 months after completing all construction work under the contract, and Western Australia runs an equivalent regime with the same 28 day and 6 month markers. Once the longest of those windows closes, the fast statutory path closes with it, and your only route becomes a contract debt claim through the courts, which is slower and costs more.
Trust Accounts and Queensland Leverage
Queensland gives you two forms of leverage the other states do not match. Failing to release a retention amount in accordance with the contract without a reasonable excuse is an offence under Part 4A of the QBCC Act, with a maximum penalty of 200 penalty units or one year’s imprisonment (Source), and directors take an offence provision more seriously than a contract clause. On projects where a Project Trust applies under the BIF Act, your cash retention must also be held in a retention trust account until release falls due, the trustee must notify you and give you payment advices for deposits and withdrawals, and you can confirm the account through the public QBCC Trust Account Register.
The holder must also prompt you. In Queensland, a party holding retention after Practical Completion must notify you of the end of the Defects Liability Period within 10 business days before it ends, using the approved QBCC form, and that notice is your cue to serve the final payment claim. Where their Defects Liability Period is linked to another contract, the notice may come within 5 business days after they receive their own notice, and if the contract is silent or unclear on release, a default Defects Liability Period of 12 months from Practical Completion applies. You can also request trust transaction information from the trustee at any time using the QBCC template.
New South Wales requires head contractors to hold retention in trust for projects worth over $20 million, and Western Australia phased in its own retention trust scheme under the 2023 reforms. Trust money is protected if the holder becomes insolvent, but only if you move quickly, because the window for a trust claim after an insolvency event is short. If your trust notices stop arriving, payments start slowing, or a winding up application or external administration appointment appears on ASIC’s published notices website, take advice immediately rather than waiting for the Defects Liability Period to run its course.
When the Withholding Is Legitimate
Before you escalate, test whether the holder has a point. Unrectified defects notified during the Defects Liability Period, incomplete Works, and properly certified set-offs can each justify withholding some or all of the retention under most contracts. Where the only obstacle is a short list of minor defects, completing the rectification work is usually faster and cheaper than fighting about it, and it removes the last contractual reason to hold your money.
Rachelle Hare – In My Experience
The Contractors who get their retention released quickly are the ones who can point to the exact clause, the exact date and the exact certificate. The ones who wait years are the ones who sent a general demand, got a vague reply about defects, and let it slide because the Project relationship felt more important than the money. Serve the payment claim the day the contract says the money is due, and let the Act’s timetable do the pushing for you.
Have the Contract Read Before You Rely on It
Most retention disputes trace back to a release clause nobody read closely at signing, and the fix is available at both ends of the Project. Rachelle reviews the security, retention, defects and release provisions as part of every Construction Contract Review, at tender stage when the terms can still be negotiated, and mid-dispute when you need to know exactly what your entitlement says before you demand it. Every engagement runs on a Fixed-Price Quote, so ask for one, tell Rachelle what is being held and by whom, and she will tell you whether to rectify, demand or adjudicate.
The wider rules on retention, bank guarantees and insurance bonds are covered on our Retention Money and Security in Construction Contracts pages.
