How to Claim Retention Money Under the SOP Act

Retention money is one of the most contested and frustrating payment issues in Australian construction. Head contractors hold a percentage of your contract value — typically 5–10% — and then simply never release it. If you’re waiting on retention that should have been released months or years ago, Security of Payment laws give you a way to claim it back. Here’s how.

What Is Retention Money?

Retention (also called “retention money” or a “retention holdback”) is a percentage of your progress payments withheld by the head contractor throughout the project. The purpose is to give the head contractor a financial buffer if defects arise after the work is complete. Typically, retention is held until practical completion and then again (in smaller proportion) until the end of the defects liability period — usually 12 months after practical completion.

When those periods pass without unresolved defect claims, the retention should be returned to you. Often, it isn’t.

Why Head Contractors Don’t Release Retention

Head contractors hold retention for a range of reasons — some legitimate, most not:

• Cash flow: the retention is effectively an interest-free loan they’d rather keep
• Leverage: holding your retention gives them ongoing control over your behaviour on the project
• Genuine defect disputes: in some cases, there are real defects that need to be resolved before retention is due
• Disorganisation: some retention is genuinely forgotten (though this is increasingly uncommon)
• Company restructuring: personnel changes mean no one knows or cares about releasing old retention

Can You Claim Retention Under the Security of Payment Act?

Yes — in most circumstances. Once the conditions for releasing retention under your contract are satisfied (typically end of defects liability period), you have a payment entitlement for that amount. You can serve a payment claim under the SOP Act for the unpaid retention, forcing the head contractor to formally respond with either payment or a payment schedule identifying specific reasons for withholding.

Vague defect claims without supporting evidence generally don’t survive adjudication. The adjudicator will ask: what specific defects are claimed, what is the rectification cost, and why hasn’t retention been released?

Step-by-Step: Claiming Your Retention Money

1. Check your contract: Confirm when retention is due to be released under your contract. Note the conditions — usually end of the defects liability period with no unresolved defects.
2. Confirm the defects period has expired: Make sure the period has genuinely ended. If it has and you’ve received no defect notices, you’re likely entitled to the release.
3. Serve a payment claim for the retention: Prepare a valid SOP Act payment claim specifically for the retention amount. Include the reference date and the amount owed.
4. Wait for the payment schedule: The head contractor has 10–15 business days to respond. If they don’t — the full retention amount is owed. If they issue a schedule disputing the release, you take it to adjudication.
5. Apply for adjudication if needed: Lodge your application within the required timeframe (typically 10 business days). Present evidence that the defects period has expired with no valid defect claims.

What Evidence Helps Your Retention Claim?

• The contract, showing the retention provisions and defects liability period
• Practical completion certificate (or evidence of practical completion)
• Evidence that the defects liability period has expired
• Records showing no defect notices have been served
• Previous correspondence where the head contractor acknowledged retention would be released

How PayClaim Recovers Retention Money

PayClaim has helped subcontractors across Australia recover retention money using the SOP Act process. We review your contract, identify when retention is due, prepare the payment claim, and manage adjudication if needed. Most retention claims are resolved within 10–20 business days. Start your free claim today.

Owed money? You can start your Letter of Demand here — see the whole letter free, then a flat $69 to issue it. PayClaim is not a law firm; payment outcomes are not guaranteed.