What is a progress payment?
- By Book Keeping Pros
- Sources checked 16 Oct 2026
Definition
A progress payment is a part payment made to a contractor in stages as work is delivered under a construction contract, rather than only when the whole job is finished. Each payment usually reflects the work done since the previous one, so money keeps reaching the contractor while the project is still under way.
On a job that runs for weeks or months, a contractor pays for labour, materials and equipment long before the work is finished. Progress payments bring money in as the work moves along, so the contractor is not carrying the whole cost of the job until the end.
In the books, each contract is easiest to follow when it is tracked on its own: the contract price, the amounts claimed so far, the amounts received and what is left to claim. That record shows how far each job has been paid for and which customers are behind, and the business paying for the work keeps the same kind of record for each subcontract. How income from a contract that runs across months, or across financial years, is recognised in the accounts is a question for your accountant.
In Australia
In New South Wales, Building Commission NSW says that a contractor carrying out construction work under a construction contract, or supplying goods or services under one, is entitled to progress payments for the work delivered, and links that entitlement to keeping cash flowing to contractors. It says that right, set out in section 8 of the New South Wales security of payment Act, applies whether the contract is verbal, written or absent, and even where the contract says progress payments cannot be claimed.
Unless the contract says otherwise, Building Commission NSW says progress payment claims in New South Wales can be made no more often than monthly, with the amount worked out under the contract's terms or, where the contract does not set it, from the value of the work carried out.
In Queensland, Business Queensland says the Building Industry Fairness (Security of Payment) Act 2017 sets out processes for progress payments, as well as for payment disputes and a trust account framework. Under that framework, it says the contracted party, generally the head contractor, must work out against set criteria whether a contract needs a trust account; where one is needed, contract payments go into the account and contractors and subcontractors are paid from it.
Worked example
| Month | Work completed to date (AUD) | Earlier progress payments (AUD) | This progress payment (AUD) |
|---|---|---|---|
| Mar 2026 | 30,000.00 | 0.00 | 30,000.00 |
| Apr 2026 | 72,000.00 | 30,000.00 | 42,000.00 |
| May 2026 | 96,000.00 | 72,000.00 | 24,000.00 |
| Jun 2026 | 120,000.00 | 96,000.00 | 24,000.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Keeping one running total for each customer instead of a record for each contract, so nobody can see how much of a contract price is still to be claimed.
- Taking it for granted that progress payments cannot be claimed because the contract is silent or rules them out. Building Commission NSW says the right still applies in New South Wales.
- Matching a payment to the wrong job when the same customer has several contracts running at once.
Related terms
Related service
Accounts payable and receivable
Bills and invoices tracked, with you approving every payment.
Sources
- Security of payment
Building Commission NSW. Current at 28 September 2026, released 28 September 2026. Checked 16 October 2026.
© State of New South Wales. For current information go to www.nsw.gov.au. Licence: CC BY 4.0.
- Payments in the building industry
Business Queensland. Current at 24 June 2026, released 24 June 2026. Checked 16 October 2026.
© The State of Queensland, Business Queensland, licensed under CC BY 4.0 Licence: CC BY 4.0.