For businesses in the building & construction sector, upfront deposits can be up to 5% (including GST) when the project is $20,000 or more.
GST raises another question however: Do I charge GST on a deposit?
There are different factors to consider when answering this. Is this a none refundable deposit? If not, GST should not be charged until you invoice your next progress payment or final invoice.
If the contract price is between $3,300 and $19,999, the deposit can be up to 10%.
The exception to this rule: If more than 50% of the work value is to be performed offsite (for example kitchen renovations where the modules are custom made in a factory) then the deposit can be up to 20%. For jobs valued at $3,300 or less, no more than 20% is recommended.
What Are The QBCC Reporting Obligations For Contractors?
As of December 17th, 2018 the Building & Construction Industry Payments Act 2014 was replaced by BIF (Building Industry Fairness). The aim of this reform was to help protect contractors and sub-contractors within the building industry by preventing a business from trading insolvent, leading to liquidation and unpaid bills. This situation would ultimately lead to the individual like yourself being out of pocket! The first annual report is due December 2019. The purpose of the annual report is for businesses to prove their net tangible assets and more. Yet another reason why it’s so important to have up to date bookkeeping with a balance sheet and P&L showing the accurate financial position.