Deposits, Retentions and GST on a New Build

A deposit on a new build is a modest up-front payment that secures your place in the builder’s programme and helps fund the early work, such as design coordination and ordering materials with long lead times. It is a small share of the contract price, not a large sum handed over in advance, and it should always sit inside a written contract rather than be paid on a handshake.

The protection matters as much as the payment. A deposit belongs within a proper build contract backed by a recognised guarantee, so your money is not exposed if something goes wrong. Ecotectural works under a Registered Master Builder contract, which sets out what the deposit covers and how the rest of the price is paid as the build proceeds. Because we price open-book, a promise we call Built in the Open, the deposit is one clear line in a schedule rather than a figure plucked from a lump sum. If you are new to how a build price is put together, our guide on how open-book pricing works sets out the whole picture.

Retentions are a small portion of each payment that the builder holds back and releases only after the defects period has passed, so there is a clear incentive to finish and fix everything properly. It is a standard protection for the homeowner, and the way retention money is held and returned is governed by the Construction Contracts Act.

The logic is simple. As each stage of the build is completed and claimed, a small percentage is retained rather than paid in full, and that held-back money is returned once the defects period ends and any snags have been put right. The Construction Contracts Act requires retention money to be held properly, which means it is there to protect you rather than to sit as a bargaining chip. The defects period itself, commonly around a year, is the window in which the builder returns to fix anything that shows up as the home settles and is lived in. Our guide on what happens after handover explains how the defects period and the final retention release fit together, so the last payment lines up with a home that is genuinely finished.

GST applies to the whole build, and residential build prices in New Zealand are quoted GST-inclusive, currently at 15 percent. That means the figure you agree already contains GST, rather than having it added on top at the end, so there is no separate tax surprise when the final invoice arrives.

This is worth confirming in writing, because it differs from some commercial work that is quoted plus GST. On a home, the contract price you sign is the price including GST, and every progress claim, the deposit and the retentions are all figures within that inclusive total. GST is charged on the entire cost of the build, the labour and the materials alike, not just part of it. The practical takeaway is straightforward: when you compare build figures, make sure you are comparing like with like, both GST-inclusive, so a number that looks lower is not simply a price with the tax left off. Keeping the price inclusive and visible is part of pricing openly rather than presenting a bare headline figure.

Open-book pricing lays the deposit, each progress claim and the retentions out as clear, itemised lines, so you can see the real cost of the work and exactly what is held back and when it is released. Nothing is folded into a single lump sum where the moving parts disappear from view.

Under our Built in the Open promise, you see the deposit at the start, then a schedule of progress claims as each stage of the work is actually completed, with the builder’s margin, a flat 15 percent, agreed openly up front rather than hidden inside the total. The retention held back from each claim is shown, along with when it is due to be returned. A 10 percent contingency is built in as a matter of course, on the plain logic that if you cannot afford the contingency, you cannot afford to build. Progress claims are paid as the work is done, which is also how a construction loan is drawn down in stages, and our guide on construction loans and progress payments shows how the payment schedule and your finance line up. Because the whole schedule is visible, the deposit and retentions are predictable rather than a source of doubt.

Before you sign, check four things: the payment schedule, the retention amount and how it is held, the length of the defects period, and that the price is GST-inclusive. A Registered Master Builder contract sets these out clearly, which is one good reason to build under a recognised, written contract rather than an informal arrangement.

Read the payment schedule so you know what each claim covers and when it falls due, and confirm the retention percentage and that it is held in line with the Construction Contracts Act. Check the defects period and what triggers the final retention release, so the last payment matches a home that is properly finished. The guarantee sits behind all of this, and our guide to the Master Builder guarantee explains what that cover means. The table below summarises the three pieces and what to confirm for each.

None of this is complicated once it is written down. The aim is simply that the deposit, the payments, the retentions and the tax are all visible and agreed before any work begins.

On a new build, a deposit secures your place and funds the early work, retentions hold back a small portion of each payment until the defects period confirms the home is properly finished, and GST applies to the whole build with residential prices quoted GST-inclusive. Set out openly in a written contract, none of it is a surprise; it is simply how a build is paid for, in order and in full view.

The thread through all of it is transparency. Ecotectural has designed and built architectural homes across Nelson Tasman since 2006, pricing open-book under our Built in the Open promise and building under a Registered Master Builder contract, so the deposit, the payment schedule, the retentions and the defects period are agreed openly from the start. You can see how the whole approach fits together on our design and build page, and if you are weighing up a build, the best first step is to arrange a consultation and walk through the numbers before anything is locked in.