What is retention of title?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Retention of title is a contract term under which goods delivered to a buyer stay the seller's property until the buyer has paid for them in full. Until then, ownership stays with the seller. Businesses that supply goods on credit use it to limit the risk of handing over goods that are never paid for.
A retention of title clause is about who owns the goods, not about how the sale is invoiced. The seller still invoices the customer and follows up the unpaid amount like any other credit sale, and the buyer still has a supplier bill to pay. How the accounts treat goods that have been delivered but are not yet owned is a question for your accountant.
How far the clause protects a seller is a legal question, but the records can at least show what each customer agreed to. In practice that means keeping the signed terms of trade or contract for each credit customer on file, and making sure invoices refer to the same terms.
In Australia
business.gov.au's glossary describes retention of title as a contract clause that lets a buyer have the property while legal ownership waits until the price is fully paid.
Its guidance on payment terms describes the same idea, without using the name, when it discusses selling on credit. One of the steps it lists for reducing that risk is telling customers plainly that the goods stay the seller's until the full price is paid.
Common mistakes
- Assuming a retention of title clause applies when it sits in terms the customer never saw or accepted.
- Treating the clause as a reason not to follow up overdue invoices.
- Losing the signed terms of trade, so there is no record of what the customer agreed to.
Related terms
Related service
Accounts payable and receivable
Bills and invoices tracked, with you approving every payment.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Payment terms
business.gov.au, Australian Government. Current at 16 October 2026, released 18 December 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Suppliers
business.gov.au, Australian Government. Current at 16 October 2026, released 30 March 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.