Guide
Holdback, and the 2026 change
Ten per cent of every job sits behind you, unpaid, by law. The rule that changed this January is when it has to come out — and on a long job, that's the difference between waiting years and being paid every twelve months.
What holdback is
Every payer on a contract or subcontract where a lien can arise holds back 10 per cent of the price of the services or materials as they are actually supplied, and keeps holding it until the liens that could be claimed against it have expired or been satisfied, discharged or otherwise dealt with under the Act (s. 22 (1)). That's your client holding 10 per cent of yours, and you holding 10 per cent of each sub's.
Two things follow that surprise people:
- It isn't optional and it isn't a negotiation. The obligation applies whether or not the contract provides for partial payments or payment on completion (s. 22 (3)).
- It isn't late payment. A requirement to pay under the prompt-payment rules is subject to the holdback requirement (s. 6.2). An owner paying 90 per cent on day twenty-eight has paid you on time.
There's a second, separate 10 per cent for finishing work: once the contract is certified or declared substantially performed but work remains, the payer holds 10 per cent of the price of what's left as it's supplied (s. 22 (2)).
What changed in 2026
Holdback used to sit until the end. Now there's a yearly release, and it runs off the anniversary of the day the contract was entered into (s. 26):
- Within 14 days of the anniversary, the owner publishes a notice of annual release of holdback, in the prescribed form, saying how much they intend to pay and when (s. 26 (3)).
- At least 60 days and not later than 74 days after that notice is published, the owner pays the contractor all the holdback accrued on the year just ended (s. 26 (4)).
- Within 14 days of being paid, the contractor pays each subcontractor the holdback accrued on their work over that same year (s. 26 (5)). A subcontractor holding back from another subcontractor does the same (s. 26 (6)).
The gap between the notice and the payment isn't administrative dithering — it's the lien window. A lien preserved or perfected against the contract stops the payment, and the same goes down the chain to a sub whose subcontract has a lien against it. When whatever was blocking it clears, payment is due within 14 days (s. 26 (7)). Anything still unpaid comes out after the liens have expired or been dealt with, 14 days at each step down the chain (s. 26 (8)).
Why the dates line up the way they do
A contractor's lien for work supplied up to substantial performance expires 60 days after the earlier of two things: the day a copy of the certificate or declaration of substantial performance is published, and the day the contract is completed, abandoned or terminated (s. 31 (2)). That 60-day window is why the annual release can't be paid sooner than 60 days after the notice. Publish, wait out the window, pay.
What it means on a real job
- On anything longer than a year, the money now has a date. Mark the contract anniversary the day you sign, because the whole chain hangs off it.
- You are a payer too. Fourteen days after the holdback lands, your subs' share goes out. That's tighter than the clock you were on, and it's the one a sub will hold you to.
- Know your own holdback figure at all times. Ten per cent of what has actually been supplied isn't ten per cent of the contract — it moves every time you bill.
- A quiet notice is still a notice. The owner publishes it; nobody is obliged to ring you about it.
Where this becomes a lawyer's question
Three places, and they're the reason this page stops here:
- Which version of the Act applies to your project. Older improvements can still be governed by the Act as it read before the 2017 amendments (s. 87.3), and the 2024 amendments apply to an improvement on and after the day they came into force except as the transition rules say (s. 87.4 (2)).
- When the first annual release actually lands on a contract you signed before 2026. The Act says the first anniversary caught is the second anniversary of the contract date falling after the new section came into force — and that first payment sweeps up all the holdback accrued before it (s. 87.4 (4)). Getting that date wrong in either direction is expensive.
- The form and the publishing. The notice is "in the prescribed form", and some project agreements can be carved out by regulation (s. 26 (5)). What that means for your paperwork isn't something to guess at.
How Millo does it
Plainly: Millo doesn't calculate your holdback. It's set by your contract and the Act, not by software, and a number that important shouldn't come from a guess about which rules your job is under. What Millo does is keep every invoice and every bill against its job, so the figure holdback is 10 per cent of — what's actually been supplied and billed — is in front of you and current, and it shows the Act's dates beside the bills you enter. Millo is job-costing software that runs on your own office computer, bought once.