Global Retention Reform Is Gaining Ground, But Subcontractors Still Write It Off
We’re seeing promising signs that construction retention reform is moving in the right direction. Around the world, governments are taking action to protect subcontractors from late payments.
New Zealand introduced trust accounts; Australian states and territories are improving, with Victoria recently enacting Security of Payments reform. And the ongoing debate in the UK is focused on how, not if, they’re going to tackle late payments.
But for all the legislative progress that’s been made, I still meet subcontractors who, come tax-time, continue with the same habit of pricing retention in then writing it off.
Why Writing Off Retention Costs You More Than Chasing It
Writing off a bad debt on your tax return only claws back your tax rate around 25-30% depending on your business structure and jurisdiction. But chasing it down rather than leaving it unrecovered gets you the full amount. A write-off shouldn’t be seen as a win; really, it’s damage limitation. And why should subcontractors settle for a fraction of the money they’ve already earned?
Multiplied across a multibillion dollar industry, that lost revenue adds up to colossal amounts owed to hundreds of thousands of subcontractors. I’ve calculated that, at any one time, there’s an estimated $22 billion held in retention across Australia and New Zealand, and an estimated £3.2–£5.9 billion held annually in the UK.
On an individual level, a solo bricklayer might charge $10,000 for a single job and have $500 held in retention. At a rate of roughly one job a week, that could represent $26,000 withheld each year, or $52,000 accumulated over two years if none of it had yet been released, which an independent contractor could be using to either grow the business or cash out as profit. Larger businesses with higher turnover are leaving even more money on the table.
For businesses of all sizes, there’s never a bad time to get on top of retention and claim back your untapped revenue. But while the legislative direction is encouraging, global industry headwinds and the resulting prospect of downstream insolvencies should make claiming retention back an urgent priority.
Why 2026’s Insolvency Risk Makes Claiming Back Retention Money Urgent
2026 has been a year of tighter margins and rising costs. In Australia, construction drives 27% of corporate insolvencies, the largest source for four years running, as total insolvencies hit record highs, reflecting Australia’s construction insolvency crisis. New Zealand’s construction insolvency data shows business failures hit post-GFC highs in 2025, though construction is now slowing. UK construction contracted at its sharpest pace since 2020, per UK construction PMI data.
You may be entitled to claim back retention, with the law on your side more than ever, but the odds are still against you if you don’t claim on time, or file incorrectly, and end up in a long queue of creditors.
In this financial climate, letting your own cash slip away is becoming an unnecessary risk.
Retention Tracking Is an Admin Problem, Not a Regulatory One
For every ten clients we meet, we discover ten different methods to track retention. I’ve seen every variation of spreadsheets (often changing format month-to-month!), convoluted Outlook folder setups, and disorganised paper filing systems. All of them struggle to achieve the same core objective: tracking what subcontractors are due and when to claim it.
Retention is often discussed as a regulatory problem, but I feel it’s more accurately described as an admin problem. The improved legislation and strong payment claim enforcement we’re starting to see doesn’t matter if subcontractors aren’t prepared with properly tracked retention data.
In my experience, homemade systems like this rarely work as intended, but that’s just a natural consequence of there being no consistent industry standard like those addressing common financial processes like payroll and invoicing.
We built Retention Track to create that missing industry standard. We saw there was a need for a framework that manages the entire process, from initial contract through practical completion to the end of the defects liability period.
In the process, we had to find a solution to the barriers preventing many subcontractors from accessing their own money.
Where Subcontractors Lose Retention Money: Accounting, Tracking, and Claiming
We see subcontractors losing control of their retention, and sometimes giving up entirely, at three stages of the process: accounting, tracking and claiming. Fixing those issues is key for subcontractors to stop writing off money they’ve already earned and increase their cash flow in uncertain times.
The three stages where retention commonly goes unclaimed
| Stage | The Problem | What Goes Wrong |
|---|---|---|
| Accounting | Unsuitable or manual accounting methods | Subcontractors pay GST and income tax on retention they haven’t received, and sometimes never will |
| Tracking | Spreadsheets, inboxes, and paper filing that don’t talk to accounting systems | Missed deadlines and lost data due to manual, disconnected processes |
| Claiming | Inaccurate final pay claims and inconsistent legislation across jurisdictions | Claims don’t hold up to scrutiny; businesses lack time or resources to navigate AU, NZ, and UK rules correctly |
These three problems have one solution: construction businesses need a consistent retention framework that keeps them on top of the legal requirements in each jurisdiction. In our experience, this results in accurate payment claims, reliable data on variations, claim statuses and communications with head contractors, and deadline reminders, with a strong audit trail in the event of delays or disputes.
How Retention Track Solves the Accounting, Tracking, and Claiming Problem
Retention Track is designed to address these issues with a top-down dashboard view of outstanding retention. With input costs rising, head contractor finances and project pipelines at risk, it remains a competitive advantage to secure what you’re owed with legislation-compliant workflows guiding you to claim it back on-time.
The accounting problem is solved by automatically applying an appropriate accounting method that avoids paying tax early on retention funds.
The tracking problem is solved by connecting the accounting and tracking process, all brought together in an easily maintained dashboard view with Xero integration.
The claiming problem is solved with a guided workflow to collect auditable data, customised for your specific area’s legislation, to make payment claims on time and support adjudication if needed.
Rather than setting up a bespoke system from scratch, subcontractors we work with typically spend as little as 10 minutes a week to stay on top of their retention balance and reclaim withheld payments on schedule.
While the industry rides out global supply chain disruption, rising interest rates, and increased fuel costs, construction businesses should focus on what they can control: cash flow and documentation.
In my experience with our clients, I’ve seen how improving retention tracking can benefit construction businesses. Reclaiming retention rather than writing it off can increase cash flow, save time on admin, and prepare businesses to weather input price fluctuations and set up for future growth when the industry turns the corner.
Most importantly, it stops your own cash slipping through the cracks.
Book a demo with Retention Track if you’d like to see how we can help your business.
Frequently Asked Questions
Can subcontractors still claim retention after a head contractor becomes insolvent?
Yes, but recovery depends on the jurisdiction and whether retention sits in a statutory trust account. Subcontractors without trust protection become unsecured creditors, ranked behind secured lenders. Filing your claim on time and correctly is essential, since late or incorrect claims push you further back in the insolvency queue and reduce your chances of recovery.
Is it better to write off unclaimed retention or chase it?
Chasing it is better. Where a bad debt is eligible for a tax deduction, the deduction generally recovers only the tax attributable to that amount, not the full debt. Actively pursuing and claiming retention recovers the full amount owed to you. A write-off should be treated as damage limitation, not a genuine solution to lost revenue.
What’s the difference between a regulatory retention problem and an admin problem?
Legislation protects a subcontractor’s legal right to reclaim retention, but that right is meaningless without accurate records. Retention becomes unrecoverable when project dates, invoices, variations, and deadlines aren’t properly tracked. Most retention is lost to poor admin systems, not weak or unfavourable law.
