Set-off and back charges: the deduction you only find on the certificate
Most subcontracts let the builder deduct money it believes you owe from any payment, without warning or proof. The practical defence is to query every difference between your claim and the certificate in writing the day it arrives, asking for the clause, the notice and the evidence.
Chapter 4: The deduction you find out about on the certificate
You claim $84,000. The certificate says $71,600. There might be a line saying back charges or contra, or nothing at all. No letter, no phone call, and by the time you've worked out what the $12,400 was for, the payment run has gone through and getting it back is your problem. When the book was written (Sept 2026), 57 of 58 subcontracts in the Australian Subcontract Index let the builder do this without telling you first. The usual clause lets a belief, held reasonably, take money from any payment or your security, and if the belief is bigger than your claim, you owe the difference.
From inside a contracts office it doesn't feel like taking your money. At month end the question is simply what the job has against the subbies this month: cleaning, a scuffed wall split between trades, a few days of LDs on account. It lands hardest on the quiet subbies, because the one who disputed the last deduction in writing is too much of a headache for $1,800 of painting.
Picture a $36,700 back charge. One email asking for the diary entries, the photos, the invoices and the basis for charging you rather than four other trades, and it comes back as a $4,100 painter's invoice split three ways. Your share is $1,367. Ask for set-off limited to agreed or notified amounts with ten business days to dispute, and read every certificate the day it lands.
- 1When the book was written (Sept 2026), 57 of 58 Index subcontracts allowed set-off without prior notice.
- 2A typical clause needs no notice, reasons or proof before the deduction, only a reasonable belief.
- 3In my experience, unquestioned set-off runs at one to two per cent of contract value: $5,000 to $10,000 on a $500,000 package.
- 4A same-day written query recovers between half and all of what is deducted, in my experience, because most deductions were never meant to survive a question.
Pull your last three certificates and lay them next to the claims. List every difference, and whether you got notice, reasons or evidence. For any still unexplained, send a written request for the clause, the notice and the records, copied to the project manager. You're still owed the money.
Common questions
Can a builder deduct back charges without telling me?
Many subcontracts allow it, so contractually the answer is often yes. But the deduction still has to fit the clause, and many back-charge clauses require notice and a chance to fix the problem first. Under the security of payment Acts, reasons for paying less generally need to be in the payment schedule. Check your contract and your state's Act.
How do I dispute a back charge from a builder?
Put it in writing the day the certificate arrives. Ask for the clause relied on, the notice given and the supporting records such as diary entries, photos and invoices, with a deadline of about five business days. Copy the project manager. If nothing comes back, the amount generally goes into your next claim as owing.
Free guides on this topic
A summary of chapter 4 of Screwed Down by Mat Kennedy. Index figures are as they stood when the book was written (Sept 2026); the live numbers are on the Index. Amazon ranking as seen in September 2026. General information, not legal advice.