What retention is
Retention money is a slice of each progress payment — often a small percentage of the value certified — that the party above you keeps back as security that you will complete the work and rectify any defects. It is not a fee and it is not lost: it is your money, held temporarily. It is deducted from progress payments you are otherwise entitled to under the Act s 8, Building and Construction Industry Security of Payment Act 1999 (NSW) (as of 8 July 2026) and released back to you when the contract’s release triggers are met. The catch is that those triggers land months after the work, which is exactly why so much retention never comes home.
Retention money trust accounts
Cash retention used to simply sit in the head contractor’s account — and vanish if that contractor went under. NSW closed much of that gap. For certain construction contracts above a set value, the security of payment legislation requires a head contractor to hold subcontractors’ cash retention in a dedicated retention money trust account, kept separate from the contractor’s own funds, with record-keeping and account rules attached. The point is protection: if the head contractor fails, the retention is quarantined and still yours.
Verify the detail: the trust-account requirement, its contract-value threshold, and the account and record-keeping rules sit largely in the security of payment Regulation rather than the numbered sections of the Act, and the threshold has moved over time. Confirm whether the scheme applies to your contract, and the current threshold, before relying on it. TODO: counsel-verify trust-account threshold, Regulation references, and release timing before go-live.
The defects liability period
The defects liability period (DLP) is the window after practical completion during which you stay responsible for fixing defects in your work. It is a creature of the contract, not the Act — its length is whatever your contract says, commonly measured in months — and it governs when your final retention comes back. Until the DLP ends and any notified defects are made good, the party above you typically holds the last tranche of retention as its safety net.
Release milestones
Retention almost always releases in two stages, both set by your contract:
- At practical completion — a first portion (often half the retention) is released when the works reach practical completion.
- At the end of the defects liability period — the balance is released once the DLP expires and outstanding defects are rectified.
Read your retention clause for the exact percentages and the precise release triggers — “practical completion” and “end of DLP” must be defined events with datable triggers, or you will not know when to claim. Once a tranche has fallen due for release, it is an amount owed, and it can be pursued through the same payment-claim machinery as any progress payment s 13, Building and Construction Industry Security of Payment Act 1999 (NSW) (as of 8 July 2026) — including adjudication if it is withheld.
Why retention gets forgotten — and how to stop it
Retention is the most commonly written-off money in construction, and not because anyone decides to forgive it. It is a structural trap: the release dates fall long after the job, the individual amounts are small enough to feel not worth chasing, and the person who did the work has moved on to three other sites. Practical completion passes, the DLP quietly expires, no claim is made, and the amount ages off the books.
The fix is unglamorous and effective: record every retention the day it is first withheld, capture the practical completion date and the DLP length from the contract, compute both release milestone dates, and put a “claim by” prompt against each. Then claim each tranche as it falls due, like any other progress payment. The Security of Payment hub links the retention release tracker and the retention-monitoring product as they ship — both built to do exactly this tracking so nothing ages off.