October 13, 2023

Paying A Deposit On A House Purchase: Your Questions Answered

The payment of a deposit might seem like one of the more straightforward aspects of buying residential property. However there are important things to know about your rights and obligations when dealing with a deposit due under a contract of sale, whether you are the Buyer or the Seller.

The rules about the payment of a deposit depend on the terms of the contract of sale and any relevant laws. There are some variations in how the deposit works between the states and territories of Australia, as well as how much deposit is usually agreed on between the parties.


Most contracts for the sale of property in Queensland require the payment of a deposit. This deposit is a fraction of the purchase price (no more than 10%), and is intended to show that the Buyer is serious about the purchase.

If the deposit is more than 10% of the purchase price, the contract becomes what is known as an instalment contract, and these contracts are not suitable for most Buyers or Sellers.

This deposit is held by the deposit holder in a trust account until settlement, when it is released to the Seller as part of the purchase price if the property settles successfully.

If the contract is cancelled under a condition, the deposit is usually refunded to the Buyer. If the Buyer defaults on the contract, they risk losing their deposit.

The deposit holder is usually the real estate agent, but is sometimes the Buyer’s or Seller’s solicitor.

When Do I Pay The Deposit In Queensland?

The timing of the payment of the deposit is negotiated between the parties prior to signing the contract. It is usually due within a few days of the contract being signed.

If the deposit is not paid on time, the Seller has the right to cancel the contract. It is important to note that a grace period applies to deposits paid by electronic funds transfer.

Some contracts provide for two or more deposits to be paid throughout the contract period. There will typically be an initial deposit due within a few days of the contract date, and a balance deposit due when the contract becomes unconditional, although there is plenty of variation between contracts, so it is important to double-check when your deposits are due.

If the Buyer cancels the contract under the cooling off period in Queensland, the Seller is entitled to deduct a penalty of 0.25% of the purchase price from the deposit, and must refund the balance of the deposit to the Buyer.


Generally, contracts in Victoria provide for an amount equal to 10% of the purchase price of the property, although this amount may be higher or lower depending on what the parties agree to.

The Buyer usually pays the deposit to the seller’s real estate agent, who will either hold it until the settlement date, or transfer it to a conveyancer’s or lawyer’s trust account.

When Do I Pay The Deposit In Victoria?

At least a portion of the deposit is usually paid at the time an offer is put on the property and before a sale contract has been entered into.

This initial deposit is normally 0.25% of the purchase price, and is known as a ‘holding deposit.’ It doesn’t secure the property for the Buyer, but is intended to show how serious the Buyer is about purchasing the property.

Once the Buyer and the Seller have entered into a sale contract, the balance of the deposit is usually payable. If the deposit is not paid by the deadline in the contract of sale, the Seller may cancel the contract.

If the Buyer cancels the contract under the cooling off period in Victoria, an amount of $100 or 0.2% of the purchase price (whichever is greater) will be retained by the Vendor. Due to the nature of property prices in Victoria, this amount will almost always be 0.2% of the purchase price.

Northern Territory

The deposit in the NT is usually 10% of the agreed sale price of the property, or as agreed between the Buyer and Seller, and is payable on or before 5pm on the date the contract of sale is signed.

If the Buyers do not pay the deposit by the deadline, they are in default, and the Seller has the right to terminate the contract.

Sometimes agents may ask for a smaller deposit prior to contract when the Buyer makes an offer. This deposit will be refunded if the Seller does not accept the offer.

How Much Do You Need For A House Deposit?

The deposit payable can be any amount negotiated between Buyer and Seller prior to contract, up to 10% of the purchase price in Queensland.

The Seller will normally want a larger deposit because they may consider that this means there is less risk of the Buyer backing out of the contract. The Buyer may wish to negotiate towards a more modest deposit amount, so they are risking less money if the contract falls through.

Ultimately the deposit amount will be negotiated between the parties along with the other terms of the contract.

Contract Deposit vs Bank Deposit

It is important to note that the word ‘deposit’ can have several different meanings when it is used in the context of buying property.

People on the property buying journey often confuse their contract deposit (the payment described above) with the home loan deposit or bank deposit they have saved to put towards their house.

The latter has to do with your lender, who will usually require you to put forward a portion of the purchase price of the property yourself. Buyers with lower loan to value ratios may avoid the need to pay for lender’s mortgage insurance.

If you have questions about home loan deposits, you should consult your lender.

What Happens To The Deposit?

As we’ve already covered, the deposit is initially paid into a trust account during the contract period, and is held in trust by the real estate agents or by one or the other of the parties’ solicitors.

What happens to the deposit from there really depends on how the contract proceeds and the particulars of the conditions in the contract.

If the contract settles, the deposit will be released to the Seller as part of the purchase price. If the real estate agent is holding the deposit, they will usually deduct their fees from this amount.

If the contract is cancelled and there is no breach of contract, the Buyer can usually retain the deposit. For example, if the contract is conditional on the Buyer obtaining finance and the Buyer is not able to obtain finance, they can cancel the contract and be refunded the deposit.

Where there has been a breach of contract by the Buyer, they are at risk of losing their deposit.

If in doubt, it is important to seek legal advice in relation to your particular situation.

More Questions?

From pre-contract reviews right up to settlement date, Keylaw are Australia’s leading experts in conveyancing law. If you have questions about your house deposit or any other aspect of property law, contact us today.

The above is not legal advice and is general information only.