What's a reasonable liquidated damages rate in a subcontract?
For tier-2 commercial subcontract work in Australia, a reasonable liquidated damages rate sits around $1,500–$2,500 per day, and total LD exposure should be capped at 5–10% of the subcontract sum. The rate is rarely the real problem — the missing cap is. Uncapped liquidated damages turn a late job into unlimited exposure.
Read the rate and the cap together
A $2,000/day rate with a 10% cap on a $400,000 subcontract is a bounded, insurable risk: your worst case is $40,000 and you can price it. The same rate uncapped is a different instrument entirely — twelve weeks of delay, whoever caused it, is $168,000, and the clause doesn't care whether the delay was yours.
Also check what the rate is calibrated to. LDs are meant to be a genuine pre-estimate of the head contractor's loss from your delay — a rate that looks like the head contract's LDs passed straight down to a subcontractor doing five percent of the works is not calibrated to anything about your package.
The negotiating position
Ask for a cap at 5–10% of the subcontract sum, LDs as the exclusive remedy for delay, and LDs that only run where the delay is actually yours — which makes the time bar and EOT clauses part of the same negotiation, because an EOT you're barred from claiming becomes delay you're paying LDs on.
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Scan my subcontract freeCommon questions
Can liquidated damages exceed the value of my subcontract?
Under an uncapped clause, arithmetically yes — nothing in the clause stops the daily rate accumulating past the subcontract sum. That's why the cap matters more than the rate, and why uncapped LDs are scored as critical risk in every scan.
Are liquidated damages enforceable if the builder caused the delay?
LDs are for delay you're responsible for — which is exactly why aggressive time bars are dangerous. If the contract extinguishes your EOT claim because a notice was a day late, delay that was never yours can end up on your account. The two clauses have to be read together.
Keep reading
General information for Australian subcontractors, not legal advice — statutory deadlines and details vary by state and change over time; verify them before relying on them. Written by Mat Kennedy at The Construction Contracts Co.