{{ propApi.closeIcon }}
Our industry
Our industry $vuetify.icons.faArrowRight
Housing industry insights Economics Data & forecasts Tailored research and analysis Advocacy & policy Advocacy Policy priorities Position statements Submissions News and inspiration Industry news Member alerts Media releases HOUSING Online
Business support
Business support $vuetify.icons.faArrowRight
Become an apprentice host Hire an apprentice Why host a HIA apprentice? Apprentice partner program Builder & manufacturer program Industry insurance Construction legal expenses insurance Construction works insurance Home warranty insurance Tradies & tool insurance Member perks Toyota vehicles The Good Guys Commercial Fuel savings See all Planning & safety solutions Building & planning services Safe Work Method Statements (SWMS) Solutions for your business Contracts Online Advertise jobs Trusted support & guidance Contracts & compliance support Industrial relations
Resources & advice
Resources & advice $vuetify.icons.faArrowRight
Building it right Building codes Australian standards Getting it right on site See all Building materials & products Concrete, bricks & walls Getting products approved Use the right products for the job See all Managing your business Dealing with contracts Handling disputes Managing your employees See all Managing your safety Safety rules Working with silica See all Building your business Growing your business Maintaining your business See all Other subjects Getting approval to build Sustainable homes See all
Careers & learning
Careers & learning $vuetify.icons.faArrowRight
A rewarding career Become an apprentice Apprenticeships on offer Frequently asked questions Study with us Find a course to suit you Qualification courses Learning on demand A job in the industry Get your builder's licence Continuing Professional Development (CPD) Find jobs
HIA community
HIA community $vuetify.icons.faArrowRight
Join HIA Sign me up How do I become a member? What's in it for me? Mates rates Get involved Become an award judge Join a committee Partner with us Our initiatives HIA Building Women GreenSmart Kitchen, bathroom and design hub Get to know us Our members Our people Our partners Support for you Charitable Foundation Mental health program
Awards & events
Awards & events $vuetify.icons.faArrowRight
Awards Awards program People & Business Awards GreenSmart Australian Housing Awards Awards winners Regional Award winners Australian Housing Award winners 2024 Australian Home of the Year Enter online Industry events Events in the next month Economic outlook National Conference Events calendar
HIA shop
HIA shop $vuetify.icons.faArrowRight
Most popular products National Construction Code Vol 1 & 2 Waterproofing wet areas AS 3740:2021 HIA Guide to Waterproofing HIA Guide to NCC Livable Housing Provisions Top categories Building codes & standards Contracts & documents Guides & manuals Safety products Signage For your business Contracts Online Digital Australian Standards Digital Resource Library Forecasts & data
About Contact Newsroom
$vuetify.icons.faMapMarker Set my location Use the field below to update your location
Change location
{{propApi.text}} {{region}} Change location
{{propApi.successMessage}} {{region}} Change location

$vuetify.icons.faPhone1300 650 620

GST on retention money

An issue that causes some confusion for building professionals, particularly in commercial contracts such as the HIA Medium Works Commercial Contract (with use with/without an architect or superintendent), is the charging of GST on money that is retained by the client under the contract. It is important to ensure that you are levying GST on retention money at the appropriate time and not double taxing.

What is retention money? 

In general, commercial building and construction contracts contain a provision by which the client is entitled to withhold (or ‘retain’) a certain amount from each progress payment they make to the builder. In the HIA Medium Works Commercial Contracts any retention monies are to be set out in Item 6 of the Schedule of Particulars. 

The purpose of retaining these payments is for the client to secure the proper performance of the works by the builder. 

The client may use part or all of the retained sums to offset the builder’s liability in the event that the builder does not carry out the works in a proper and workmanlike manner or fails to carry out rectification of defects within the period required under the contract. 

When does retention money need to be released? 

The Medium Works Contract provides for release of retention moneys as follows: 

  • Practical completion – Part of the retention amounts are to be held up until practical completion and are to be released within 14 days thereafter (see Clause 3.4 of the Contract)
  • Final completion – Within 14 days after the expiry of the defects liability period, the builder is to give the client a final payment claim. The balance of any retained amounts is to be released within seven days after the builder claims final payment from the client (see Clauses 27 and 28 of the Contract). 

If the retention amounts are not released then this is a matter which can be dealt with under the dispute resolution provisions of the Contract, which includes mediation or arbitration of the dispute (see clause 28 of the Contract). 

How do you apply GST to retention money? 

The Australian Taxation Office has made rulings in relation to supplies and acquisitions made under a contract that provides for the client to retain part of the progress claim pending the end of a defects liability period under the contract. 

The rulings state that GST is not payable on the retention sum until the retained amount is actually released. For example, if you make a progress claim for $20,000 and the client is contractually entitled to retain 5% of each progress claim, then this would be handled as follows: 

Invoice: $20,000
Deduct retention of 5%: $1000
Net amount to be paid: $19,000
Add GST to net amount: $1900
Total amount to be invoiced: $20,900 

The retention amount of $1000 plus GST of $100 on this amount would then be invoiced to the client at the time when the retention amount is due to be released under the contract. 

To find out more, contact HIA's Contracts and Compliance team

Email us

Share with your network:
More articles on:
{{ tag.label }} {{ tag.label }} $vuetify.icons.faTimes
Find the latest expert advice, guides and much more!

Managing your business


Can’t find what you need, check out other resources that might be closer to the mark.

Explore resources

Business support


Supporting building professionals with custom built services and products.

  • Contracts and compliance support
  • Contracts Online
  • Host an apprentice
  • Insurance Services
  • Savings for members and much more!

Explore Business support

HIA National & State Outlook Report

A comprehensive, up-to-date, and easy to follow quarterly forecast of home building and renovation activity.

HIA-Colorbond® steel Housing 100

Review the latest activities, market share and statistics of Australia’s largest homebuilders and residential developers.

New home sales report

Understand the current new home sales and construction activity each month.

HIA–CoreLogic Residential Land Report

Understand land prices, land sale volumes, and residential lot sizes on a capital city and non-metropolitan basis – right down to a statistical district level.

HIA Population and Residential Building Hotspots Report

Understand where the nation’s population growth and building hotspots are, so you can confidently plan for your future projects.

HIA Stamp Duty Watch

Understand the latest developments in stamp duty on home purchases.

Trades Report

Understand the availability of skilled trades and the costs associated on both a national and state level.

HIA Affordability Report

Understand the financial indicators impacting the affordability of homes in Australia.