Retention
Last reviewed 13 June 2026 by Nick Lim, finance broker (FBAA).
Retention is a portion of each construction payment that is held back, usually around 5 percent, and released only after the work is verified complete and any defects are fixed. Typically half is released at practical completion and half at the end of the defects liability period. It protects the party paying by giving them leverage to ensure a progress claim reflects work that is actually finished to standard.
Why Retention Matters
Retention is the holdback that keeps a builder accountable for finishing and fixing the work.
- A held-back share of each payment, often ~5%
- Linked to progress claim payments
- Part released at practical completion
- Balance released after the defects period
- Protects against incomplete or defective work
Common Features of Retention
- Usually around 5 percent of the contract
- Held by the principal or head contractor
- Released in two stages
- Tied to defect rectification
- Set out in the building contract
Official reference: business.gov.au
What is retention in construction?
A held-back portion of each payment, around 5 percent, released once work is verified complete. It is tied to each progress claim.
When is retention released?
Typically half at practical completion and half at the end of the defects liability period.
Why is retention held?
To give the paying party leverage so the builder finishes and fixes any defects.
How much retention is normal?
Often around 5 percent of the contract value, though it varies by contract.
Does retention affect cashflow?
Yes, builders carry the held-back amount until release, which is why it is negotiated carefully.