Can the builder back-charge me or set off money without notice?
Only if the contract lets them — and many do. A set-off clause drafted without a notice requirement lets the builder deduct back-charges, alleged defect costs and cross-claims from your payment unilaterally, and you find out when the money doesn't arrive. The market position is that set-off requires written notice with 5–10 business days and reasonable substantiation before a dollar is deducted.
How the clause actually gets used
Set-off is where payment disputes are manufactured. A progress claim is certified, then defect rectification, alleged supervision costs or a back-charge from another trade appears as a deduction — often round numbers, often unsubstantiated, always after the work is done. Under a no-notice clause, the deduction is the notification.
The Security of Payment Acts blunt this: reasons for paying less generally have to appear in a payment schedule served in time, or they're barred at adjudication. A builder deducting without scheduling properly is handing you leverage — if you know to use it.
What to negotiate
Written notice before any set-off, a 5–10 business day response window, substantiation (not just an amount), and set-off limited to amounts genuinely due under this subcontract — not claims imported from other projects or other entities in the builder's group.
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Scan my subcontract freeCommon questions
The builder deducted a back-charge I've never seen paperwork for. What now?
Check two documents: the set-off clause (did they follow their own contractual mechanics?) and the payment schedule (did the deduction appear in a schedule served within your state's statutory window?). A deduction that appears in neither is a strong adjudication position, not a cost of doing business.
Is set-off across different projects enforceable?
Some clauses purport to allow the builder's group to set off amounts from any other contract or project against this one. Whether it holds up is drafting-dependent — treat any cross-project or cross-entity set-off wording as a red flag worth negotiating out before you sign.
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.