The progress claim is approved, but the bank receipt is short. The remittance says a builder retention payment has been withheld. If that amount is not recorded against the job now, the final balance will be hard to prove months later.
A builder retention payment belongs in its own job ledger. Record what was withheld, why it was withheld, which contract trigger releases it and what document must be sent next. Do not leave it as an unexplained gap in accounts receivable.
What a builder retention payment means on a live job
Retention is an amount dealt with under the contract. One party withholds it until a stated event occurs, such as practical completion, completion of defects or another contract milestone.
The signed contract controls the calculation and release process. Do not assume the terms from the last project carry over to the next one.
Separate progress claims, the final balance and retention release
A progress claim asks for payment for work completed under a contract stage or payment cycle. Retention may be withheld from the amount otherwise payable under that claim.
A final balance is the amount left after you reconcile the approved contract account, previous claims, payments, approved variations and any other contract adjustments. A final balance invoice is the invoice document used to bill that balance where the contract calls for an invoice.
A retention release is different. It asks for retained money to be released after a contract trigger has been met. The contract might require a claim, an invoice, a notice or another document. Do not relabel an old invoice and assume the job is done.
Mark which side of the retention you are on
You can have retention receivable from a customer and retention payable to a subcontractor on the same project.
Keep them separate:
- Retention receivable is money withheld from your claims.
- Retention payable is money you have withheld from a subcontractor under that subcontract.
Do not net the two into one balance. They involve different parties, contracts, release triggers and payment records. A customer withholding money from you does not prove that you can withhold the same amount from a subcontractor.
Label every register entry as receivable or payable before entering the first claim.
Read the retention clause before you price or start the work
Open the contract before you build the cash plan. Find the retention clause and write its terms into the job record. If the wording is unclear, raise the question before signing or starting.
Retention affects when cash reaches the bank. It can leave you funding labour, materials and subcontractors after the work has been installed. Price the work from your own labour, materials, overhead and markup. Then test whether your cash can carry the gap created by the contract terms.
Use the job pricing guide to build the price from cost. Do not hide a retention problem inside an unsupported allowance.
Record the calculation basis and stated limit
Write down what the contract says the retention is calculated against. It might refer to claims, certified work, the contract sum or another defined amount. Use the contract wording in your register.
Also record:
- whether approved variations affect the calculation;
- whether the contract states a limit;
- whether the basis changes during the job;
- which party calculates the amount; and
- how the retained balance appears on claims and remittances.
Do not calculate retention on an approved variation until you have checked how the contract treats that variation.
Record every release trigger and notice step
A project can have more than one release event. Practical completion, defect rectification and final release may be separate events. Give each one its own field and status.
For each trigger, record:
- the exact contract event;
- who confirms that it has occurred;
- the evidence required;
- any notice or claim document required;
- the person responsible for sending it; and
- the date sent and response received.
Do not turn a contract period into a guessed calendar reminder. Record the event that starts the process and check the contract before calculating any date.
Check the regulator for the project location
Retention, payment claims, notices, trust arrangements and release processes can depend on the project location, contract type and role of each party. Check the building or security-of-payment regulator for the state or territory where the project sits.
For a NSW security-of-payment question, check the current Building Commission NSW security of payment guidance (opens in a new tab). For a job outside NSW, find the state or territory building or payment regulator responsible for that question before using a local process.
Record the official guidance page, the date you accessed it and the action you took. Get legal advice to interpret the contract or apply legislation to the dispute in front of you.
Build a builder retention payment register for each contract
The retention payment register is the control sheet. One row should explain one withholding, release or payment transaction without forcing you to search old emails.
Start the register when the contract is signed. Waiting until practical completion means the earliest deductions are already buried in remittances and bank records.
Copy-ready retention payment register
| Field | Entry |
|---|---|
| Job and project reference | [Job reference and site] |
| Contracting parties | [Customer and contractor, or contractor and subcontractor] |
| Entry type | [Retention receivable / retention payable] |
| Transaction type | [Withholding / release / payment] |
| Contract reference | [Contract number and date] |
| Claim reference | [Progress claim or release claim number] |
| Approved contract account | [Current approved amount] |
| Approved variations | [References and amounts] |
| Amount claimed | [Amount] |
| Amount certified or accepted | [Amount or not used] |
| Amount withheld as retention | [Amount shown on remittance or assessment] |
| Net amount due | [Amount after stated deductions] |
| Amount received or paid | [Amount matched to the bank transaction] |
| Amount released | [Retention approved for release] |
| Remittance reference | [Reference and date] |
| Bank receipt reference | [Reference and date] |
| Remaining retention | [Balance after this transaction] |
| Post-transaction balance check | [Reconciled / difference to investigate] |
| Release trigger | [Contract event] |
| Trigger status | [Not reached / reached / disputed] |
| Evidence required | [Documents named by the contract] |
| Release document | [Claim, invoice or notice reference] |
| Disputed amount and reason | [Amount and plain description] |
| Next action and owner | [Task, person and follow-up date] |
| Payment date | [Date received or paid] |
Filter by next action so the team can see which evidence, claim or payment needs attention.
Reconcile retention every time money moves
Do not wait for month-end. Reconcile the claim, remittance and bank receipt as soon as the payment arrives.
The on-site version is simple. The progress claim was approved, but the remittance shows less. Before calling it retention, match every line and find the stated reason for the difference.
Match the claim to the remittance and bank receipt
Put the three records side by side:
- Read the amount claimed.
- Read the amount accepted or certified, where that step applies.
- Read each deduction shown on the remittance.
- Identify the amount specifically marked as retention.
- Match the net payment to the bank receipt.
- Update the running retained balance.
A short payment is not automatically retention. It could be a disputed item, a rejected variation, a set-off, a previous credit or an error. Record the payer's stated reason instead of forcing the difference into the retention column.
Record approved variations before changing the account
A variation changes the approved contract account only when it has been handled under the contract. Keep the approval, revised scope and price together.
Then check whether the contract changes the retention calculation. Do not assume the full variation is payable immediately. Do not assume retention applies either.
Weekly records make this easier. Use a weekly site update routine to capture decisions, approvals, delays and documents while the people involved still remember them.
Worked example: reconcile the account without inventing retention
At 14 Oak Street, Quote Q-1847 was 1,105, the approved variation was 160 and Invoice INV-1847 was 1,265. No retention can be entered without a contract term and remittance record.
Prepare the completion record before release is due
Practical completion can arrive while the evidence is scattered across phones, inboxes and site folders. Fix that before sending the release claim.
Open the contract requirement beside the job file. Gather only the evidence needed for that trigger, then label each document with the job reference and date.
Gather completion and handover evidence
The required record may include completion notices, certificates, inspection records, photos, manuals, warranties, keys, access records and handover documents. Use the contract and the work performed to decide what belongs in the file.
Do not treat a photo dump as a completion record. Add a short note explaining what each photo proves, where it was taken and when.
Store the handover evidence beside the daily records described in the builder site diary guide.
Close each defect properly
Give every defect a clear description, location, owner and status. Record when the repair was completed. Add the photo, inspection note or sign-off required by the contract.
Separate disputed defects from completed defects. One unclear item should not make the whole list impossible to read.
Do not mark the release trigger as met just because the tradie has left the site. Check who must confirm completion and what evidence the contract requires.
Prepare the final balance invoice or retention release claim
A builder retention payment should be claimed with the document required by the contract and any process that applies to the project.
Before preparing the document:
- Check whether the retained amount was already included in an earlier invoice or progress claim.
- Identify the release claim, invoice, payment claim or notice required by the contract and any statutory process.
- If the amount was already invoiced, do not issue a second invoice for the same amount.
Use a final balance invoice when the amount has not already been invoiced and the contract requires an invoice at release. Use the required retention release claim or notice when the retained amount was already billed and only its release remains outstanding.
The contract and any statutory process control the document form, content, timing, recipient and service method. An ordinary invoice may not be a valid payment claim under the contract or legislation.
Build the document from the reconciled account
Show enough detail for the recipient to follow the balance:
- contract and job reference;
- approved contract account;
- approved variations;
- previous claims;
- payments received;
- retention previously withheld;
- release trigger now met;
- amount now claimed; and
- attached completion evidence.
Do not add retention to the final balance twice. Start from the reconciled contract account and show how the amount now claimed was reached.
Attach the construction payment records that support the calculation, including the claim references, variation approvals, remittances and completion evidence.
If the contract calls for an invoice, use the fields in the invoice-writing guide after you have settled the contract calculation and claim process.
For GST treatment and tax-document questions, check the current guidance from the Australian Taxation Office (opens in a new tab) or ask a qualified adviser. Do not guess the GST position from the label used on the contract document.
Control disputed or unpaid retention
First identify what is disputed. A calculation dispute is not the same as a defects dispute. A missing document is not the same as a refusal to pay.
Leave the amount visible in the register. Record the reason given, the evidence supplied, every contact and the next action. Do not delete the balance or move it into a general overdue total just to clean up the report.
Answer a calculation dispute with the account
Send the contract reference, claim history, approved variations, remittances and your calculation. Ask the other party to identify the line they calculate differently.
Keep the tone plain. One account. One difference. One requested response.
Answer a defects dispute with the close-out record
Match each alleged defect to the defects list. Record whether it is accepted, completed or disputed. Attach the evidence that supports the status.
Do not promise extra work before checking whether it is a defect, excluded work or a new variation. Keep scope questions separate from the retention calculation.
Check the formal process before sending a notice
If payment remains unresolved, read the contract and check the payment process for the project's state or territory. Confirm which document, recipient and method apply before issuing a formal notice or claim.
Do not borrow a notice from another project or jurisdiction. Get legal advice where the amount, timing or contract position is contested.
Close the job only when the retention ledger reconciles
The job is not financially closed just because the crew has finished. Match the approved contract account to claims, invoices, remittances, variations, bank receipts and the remaining retained balance. Use the job-costing close-out guide to close the costs against the correct revenue records.
Close the work and job costs when their records are complete, even if a builder retention payment remains unreleased. Leave that amount in the retention receivable ledger and keep it out of received-cash figures until it is paid.
Open each current contract, enter its next release trigger and assign the next action to one person.