Retention and the Final Claim: A Builder's EOFY Read
Retention and the Final Claim at EOFY | Switchboard Finance
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Retention · Practical Completion · Final Claim
Retention and the Final Claim: A Builder's EOFY Read
Three release events sit between practical completion and the last dollar of a building contract: the final claim, the first stage of the retention release, and the end-of-defects balance. How those three land against the 30 June line decides what a builder can actually deploy at EOFY.
Quick Answer
Practical completion does not release everything a builder is owed. The retention sum stays held under the contract, and the final claim runs its own approval path before the closing drawdown releases. How those releases line up against 30 June shapes the EOFY cash position across a builder's construction funding.
What practical completion actually triggers
Practical completion triggers the defects liability period and the right to lodge the final claim. It does not, on its own, release every dollar the contract is still holding. The certificate starts three separate clocks: the final claim, the first retention stage and the end-of-defects balance, each running at its own speed toward the builder's June position.
Practical completion is the contractual milestone at which the works are complete except for minor defects and the project can be used for its intended purpose. The certifier or superintendent issues it under the contract, and from that date the defects liability period starts running, often around 3 to 12 months, varies by contract.
The retention sum is the money held back from each certified claim along the way, commonly around 5 percent of the contract value reducing to roughly half of that at practical completion, indicative and varies by contract. It exists as the principal's security for defect rectification, which is exactly why it does not all come home when the certificate is issued. From the underwriter's seat, practical completion is a milestone the file has to evidence with a certificate, not a date the builder nominates.
The anatomy of the final claim
The final claim is the one claim in a building contract that carries more than work value. It typically sweeps up the last of the certified work, approved variations, contract adjustments and the first stage of the retention release, typically held until practical completion and beyond, indicative and varies by contract.
When that claim reaches a lender-funded project, the assessment read changes from progress to completion. What the assessor wants to see is the certificate of practical completion, any occupancy or council conditions tied to the development approval, insurances still on foot, and the contract's own release mechanics spelt out rather than assumed. The same completion evidence closes out the numbers the facility was approved against, which is why it pays to know how lenders panel and size a build of this scale and how the final position squares against the loan to cost ratio.
Where the 30 June line bites the release
The 30 June line bites when practical completion lands in June but the release mechanics run into July. A certificate issued mid June still has to travel through the final claim, the principal's review and the lender's processing before money moves, and most funders work to a 30 June cut-off, illustrative and varies by lender, for anything they will complete inside the financial year.
That timing splits the builder's position in two. The work is done and may sit in the FY26 figures, but the cash, including the first stage of retention, can arrive in FY27. For builders juggling tax obligations, supplier terms and the next site's deposit in the same month, that split is the difference between a comfortable June and a tight one. Our look at whether builders should lodge before or after EOFY covers the same timing call from the lodgement side.
The structural backdrop still helps. The Federal Budget 2026-27 measures keep investor demand pointed at newly built stock through the new-build carve-out, which supports settlement timelines either side of the financial year line. How completed stock and staged funding interact across a project is covered in how development finance works. If your own contract has the certificate landing in June and the cash landing in July, a conversation with a broker now keeps both sides of the line workable.
Funding around held retention
Held retention is capital the project has earned but cannot deploy. Where a builder is rolling crews and deposits straight into the next job, the retention sum and the tail of the final claim sit outside the working numbers, and the funding plan has to acknowledge that rather than assume the cash arrives on certificate day.
From the underwriter's seat, the expected retention release reads as part of the project's exit, alongside sales or refinance proceeds, and a clean exit strategy that maps those dates carries real weight. Brokers will typically size any follow-on facility, whether that is development finance on the next site or a supporting structure around the current one, with the held balance and its release dates in the model from day one. Major banks tend to read held retention conservatively; non-bank lenders and specialist funders will often give more weight to a documented release schedule.
If the release dates and the June obligations do not line up, speak to a broker early. The conversations that work are the ones that start before the certificate is issued, not after the June payment run has already been missed.
Practical completion starts the release sequence rather than ending it. The final claim sweeps up the last certified work, variations and the first stage of retention, the defects liability period holds the balance into the new financial year, and the lender's completion checks sit between the certificate and the cash. A builder who maps those dates against 30 June, and structures funding around the held balance instead of assuming it, walks into EOFY with options rather than surprises.
Key takeaway: Treat practical completion as the start of the release sequence, not the end of it, and plan the EOFY position around when retention actually lands.Frequently Asked Questions
Construction retention is typically released in two stages, with the first portion at practical completion and the balance at the end of the defects liability period, indicative and varies by contract. The first stage usually travels with the final claim rather than with an earlier drawdown, so the release date follows the certificate, not the last site payment. Builders planning around 30 June should map both stages, because the second can sit months into the new financial year.
Practical completion and final completion are different contractual milestones: practical completion is the point where the works are usable except for minor defects, while final completion arrives once the defects liability period has run and rectification is closed out. The retention balance is generally tied to final completion, which is why it lags the handover. Lenders funding projects across the construction lane read both dates when they assess the tail of a facility.
Held retention affects a builder's EOFY cash position by leaving earned money locked inside the contract while tax, super and supplier obligations still fall due in June. The work may sit in the year's figures while the cash arrives after 30 June, which narrows what the builder can actually deploy in the weeks that matter. Using a caveat loan to hit a 30 June settlement shows the funding side of that squeeze when a deadline cannot move.
Borrowing directly against unreleased retention is uncommon among mainstream funders, but the expected release is regularly read as part of a file's exit strategy when brokers structure follow-on funding. Non-bank lenders and specialist funders will typically weigh the certainty of the release dates and the contract terms behind them. The cleaner the paper trail, the more weight the release carries in the next facility, including the options mapped inside a construction loan pack.
A defects liability period is the window after practical completion, often around 3 to 12 months and varies by contract, during which the builder must rectify defects that emerge in the completed works. The retention balance is usually held as the principal's security across this period. It matters to finance because lenders treat the period as part of the project timeline, in the same way the build stages are mapped in how development finance works.
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