What Is a Deposit Limit?
A deposit limit is the maximum upfront payment a builder can legally request from a homeowner before commencing residential building work. These limits are set by state legislation and exist to protect homeowners from losing large sums of money if a builder fails to start or complete the work. Requesting or accepting a deposit above the legal limit is an offence that can result in disciplinary action against the builder.
Why Deposit Limits Exist
Deposits are a normal part of building contracts — they demonstrate the homeowner’s commitment and help the builder cover initial material and planning costs. However, excessively large deposits expose the homeowner to financial risk if the builder becomes insolvent, abandons the project, or performs defective work. Statutory deposit limits balance these interests by capping the amount at risk.
If a builder asks for a deposit that exceeds the legal limit, this is a significant warning sign and may indicate they are:
- Experiencing cash flow problems
- Not properly licensed
- Planning to use your deposit to fund other projects
State Variations
| State/Territory | Maximum Deposit | Contract Value Threshold |
|---|---|---|
| QLD | 5% of contract price | Contracts over $20,000 |
| NSW | 10% (contracts up to $20,000) / 5% (over $20,000) | $5,000+ |
| VIC | 5% of contract price | Contracts over $10,000 |
| WA | 6.5% of contract price | $7,500+ |
| SA | No prescribed statutory limit | Recommended 5% |
| TAS | 5% of contract price | Major domestic building work |
| ACT | 5% of contract price | $12,000+ |
How It Relates to Licence Verification
Licensed builders are bound by the deposit limit rules set by their state licensing body. Exceeding the legal deposit limit can result in a fine, licence suspension, or prosecution. Verifying a builder’s licence through TradieVerify before making any payment helps confirm you are dealing with a regulated professional who must comply with deposit limit laws.