Protecting your deposit: a Melbourne homeowner's guide to Victoria's 5% rule

What Victorian deposit rules say, why the 5% cap exists, and how to make sure your money is safer before you sign.

If a Melbourne builder is asking you for a 20% deposit on a $40,000 renovation, check the current Victorian deposit rules before paying. In many domestic building scenarios, deposit limits are far lower than homeowners expect. Most homeowners only learn that after they've already overpaid.

What the 5% rule actually says

Victorian domestic building rules set limits on deposits a builder can take before work starts. The intent is simple: cap the homeowner's exposure if a builder collapses, walks off the job, or fails to begin work. Check the current rules before paying.

Contract value $20,000 or more: maximum deposit 5%.
Contract value under $20,000: maximum deposit 10%.
These limits apply to any domestic building contract, including renovations.

If a registered builder asks for more than the cap, that's a breach of the Act. You can — and should — push back, in writing, before paying.

Why the cap exists: the Porter Davis lesson

The cap exists because deposit risk is the single biggest financial exposure a homeowner takes on a domestic build. When Porter Davis collapsed in March 2023, hundreds of Victorian families lost six-figure deposits. The reform conversation that followed has shaped recent Victorian building-law reform.

But the 5% cap on its own only gets you so far. It limits your loss; it doesn't prevent it. That's the gap a milestone-payment platform like TradeFlo+ is built to close.

Domestic Building Insurance is separate

Anyone undertaking domestic building work valued at $16,000 or more must take out Domestic Building Insurance (DBI) before accepting a deposit. DBI covers up to $300,000 — six years on structural defects, two years on non-structural — and is enforced by the Building and Plumbing Commission. Make sure the certificate of currency is in your hand before you transfer a cent.

Cooling off: your 5 business days

After signing a domestic building contract, cooling-off rights may apply. Use them. Read the contract. Cross-check the builder's registration on the Building and Plumbing Commission's public register. Check their DBI policy.

The new regulator: BPC, since July 2025

On 1 July 2025, the Building and Plumbing Commission (BPC) replaced the Victorian Building Authority. It absorbed the dispute-resolution function previously handled by Domestic Building Dispute Resolution Victoria. If your build goes sideways, BPC is now the front door — though VCAT remains available for matters that escalate.

What changes on 1 December 2026

Most of the Domestic Building Contracts Amendment Act 2025 commences on 1 December 2026. The headline change is that deposit and progress-payment limits move from primary legislation into regulations, making them easier to update as conditions change. The rest of the Act tightens consumer protections rather than loosening them.

How TradeFlo+ fits into this

Full-job upfront funding is confirmed before work starts, then TradeFlo+ tracks milestone releases after approval and dispute-window checks. The audit trail is timestamped and exportable. The dispute window is 48 hours per milestone. If you ever need to escalate to BPC or VCAT, you'll already have the paper trail.

Bottom line: never pay more than the legal deposit cap. Hold the rest in a system that releases on approval, not on trust.

Pay your next tradie properly.

Free to sign up. 1.5% capped at A$74.50 only when a payment moves.

Get the app How it works