What deposit can a builder legally ask for in Victoria?
Victorian law caps builder deposits at 5% for contracts over $20,000 and 10% for smaller jobs. Here's exactly what the Domestic Building Contracts Act says — and the red flags to watch for in your quote.
You've finally found a builder for your $150,000 renovation, but the initial invoice asks for a $15,000 deposit "to secure the start date and order materials." It feels like a lot of cash to hand over before a single nail has been driven, and you're worried that if you push back, you'll lose your spot in their schedule. Here is exactly what the law says about how much of your hard-earned money a builder can actually touch upfront.
The legal limits in Victoria
In Victoria, the Domestic Building Contracts Act 1995 sets strict caps on deposits to ensure homeowners aren't over-leveraged if a builder walks away or goes bust:
- For contracts under $20,000: The maximum legal deposit is 10%.
- For contracts of $20,000 or more: The maximum legal deposit is 5%.
If your project is a $100,000 renovation and your builder asks for $10,000 (10%), they are breaching the Act. Legally, they cannot ask for more than $5,000.
The $16,000 insurance threshold
Under Victorian law, if the work is valued at more than $16,000, the builder must provide you with a certificate of Domestic Building Insurance (DBI) before they can take a cent of your deposit. This insurance protects you if the builder dies, disappears, or becomes insolvent — covering incomplete work (capped at 20% of the contract value) and structural defects, up to $300,000.
If a builder asks for a deposit on a $50,000 job but hasn't handed over the DBI certificate first, do not pay. It is a legal violation. Verify at dbi.vmia.vic.gov.au.
Progress payments: what happens after the deposit
For a Major Domestic Building Contract (over $10,000), the Act regulates how remaining payments are structured. A compliant builder aligns payment requests with defined construction stages:
| Stage | Typical % | What it covers |
|---|---|---|
| Deposit | 5% (or 10% under $20k) | Before work begins |
| Base stage | ~10% | Footings and slab poured |
| Frame stage | ~15% | Wall and roof framing erected |
| Lock-up | ~35% | Roof on, external walls complete, windows and doors installed |
| Fixing stage | ~25% | Plasterboard, cabinetry, tiling, painting |
| Completion | ~10% | Final finishes, handover, occupancy permit |
The builder can only claim each stage payment after that stage of work is complete.
What to watch for in your quote
"Pre-construction fees" that push the total above the cap
Builders sometimes label parts of the upfront payment as "admin fees" or "site setup costs." If your contract is for $80,000 and the builder asks for a $4,000 deposit plus a $3,000 "project commencement fee," the combined total of $7,000 exceeds the 5% cap of $4,000 — and may breach the Act regardless of labelling.
Pressure to pay early "to buy materials"
The legal deposit cap doesn't change because of supply chain pressures. If a builder says they can't start without a larger deposit, that's a warning sign about their cash flow.
Vague payment schedules not tied to stages
If the contract says "50% on signing, 50% on completion" rather than aligning with construction stages, the payment structure may not comply with the Act.
Upcoming law changes
The Domestic Building Contracts Amendment Bill 2025 was introduced to the Victorian Parliament in June 2025. If passed, reforms expected to take effect on 1 December 2026 will give regulators new powers to adjust deposit limits and strengthen enforcement. The current 5% and 10% caps remain in force until then.
What to do next
- Calculate the deposit as a percentage of the total contract price — is it within the 5% or 10% cap?
- If the project is over $16,000, has the builder provided a DBI certificate? Verify at dbi.vmia.vic.gov.au.
- Check whether any "pre-construction fees" push the total upfront payment above the cap.
- Review the payment schedule — does it follow the stage-based structure?
This article is for general information only and does not constitute legal or financial advice. Sources: Domestic Building Contracts Act 1995 (Vic) · VMIA — dbi.vmia.vic.gov.au · Consumer Affairs Victoria