Generally, no: Consumer Affairs Victoria’s Preparing a major domestic building contract guidance, dated 8 July 2025, says a cost-plus method cannot be used for a major domestic building contract below $1 million; it identifies $1 million as the threshold above which such contracts are permitted and $10,000 as the threshold amount for a major domestic building contract (figures checked 1 October 2026). The narrow exception is cost-plus work used only to investigate an existing house so the contract price can be established, with a fair and reasonable estimate of the total amount likely to be received. The builder must then enter a fixed-price contract with the client for the remaining work.
What do the key thresholds mean?
| Amount | Consumer Affairs Victoria position |
|---|---|
| $10,000 | Threshold amount for a major domestic building contract. |
| $1 million | Threshold above which cost-plus contracts are permitted. A cost-plus method must not be used for a contract below this amount, apart from the narrow investigative-work exception. |
Consumer Affairs Victoria gives a direct example of cost-plus pricing: charging by the hour without providing a fixed price for the contract. Providing an estimate does not make that pricing method available for the entire renovation.
How should the investigative-work exception work?
The exception has three connected requirements:
- Limit the cost-plus work: It must concern the renovation of an existing house and cover only investigative work required to establish the contract price.
- Give a fair and reasonable estimate: The estimate must cover the total amount the builder is likely to receive, not merely describe the investigation as an open-ended hourly arrangement.
- Move to a fixed price: After the investigative work, the builder must enter a fixed-price contract with the client for the remaining work.
The cited material does not identify every activity that qualifies as investigative work. If the proposed scope goes beyond work needed to establish the contract price, check with Consumer Affairs Victoria before treating it as an exception. The exception does not permit the entire renovation to continue on a cost-plus basis.
Is the investigation estimate enough for the whole job?
No. The estimate supports the process of establishing the contract price during the permitted investigative stage. Consumer Affairs Victoria separately requires a fixed-price contract for the remaining work.
A client should therefore distinguish between:
- the narrow cost-plus investigation arrangement;
- the fair and reasonable estimate of the total amount likely to be received; and
- the fixed-price contract covering everything that remains.
What should the fixed-price contract make clear?
The fixed-price contract must still meet the ordinary requirements for a major domestic building contract. In particular, it should:
- be in writing and clear English, with all terms fully set out;
- describe the work in detail and identify the parties, their addresses and the builder’s registration number;
- state the contract price, legally required deposit and progress payments, and the effective date;
- give clear advice about the cooling-off period;
- record the client’s special requirements and finishes in the plans and specifications;
- clearly identify fixtures or fittings of unknown price as provisional sum or prime cost items;
- address start and finish dates, foreseeable delays, inclement weather, extensions of time and liquidated damages; and
- be supported by a copy of the Domestic Building Consumer Guide provided to the client before signing.
The contract must not include a compulsory arbitration clause, a caveat over the building site land, or a waiver or negation of implied warranties.
This is general information, not financial or legal advice. Check the Consumer Affairs Victoria regulator page before relying on the investigative-work exception, and check the relevant policy’s PDS for any insurance policy connected with the project.
Sources
FAQ
Does charging by the hour always mean a cost-plus contract?
Consumer Affairs Victoria’s example is charging by the hour and not providing a fixed contract price. That arrangement is generally prohibited below $1 million unless it falls within the narrow existing-house investigative-work exception.
What must the investigative estimate cover?
It must be a fair and reasonable estimate of the total amount the builder is likely to receive.
Can cost-plus pricing continue after the investigation is complete?
No. The builder must enter a fixed-price contract with the client for the remaining work.
What if it is unclear whether the work is investigative?
The cited Consumer Affairs Victoria material does not enumerate every qualifying activity. The exception should be applied only to investigative work required to establish the contract price; check the regulator page if the proposed scope is wider.