06 Apr 2022

Do Progress Payments Include Profit?

Progress Payments and Profits

Construction projects allow Australians to build their dream homes. Plus, investors can build multi-unit structures to keep and lease or sell. To fund these projects, owner-builders and investors apply for construction loans. Construction loans differ from residential mortgages. For example, lenders disburse the payments in increments instead of lump sums. Lenders have a process for paying progress payments.

Most construction projects take place in five stages. After every stage, the borrowers fill out paperwork and include documentation to the lender. Loan specialists review it. If approved, they release the payment for the stage within five to 10 business days. 

Next, the borrower disburses payments to their contractors and subcontractors. Sometimes the payments go directly to the construction professionals or the professional who acts as the project manager. Construction projects require the skills of several professionals such as electricians, plumbers, and painters. 

When they receive their payment, it might include their profit from the project. That concerns the recipient more than the owner-builder or investor. Owner-builders and investors worry about profit when they rent or sell the property.

Progress payments do not count as invoice payments. Thus, professionals will take care of declaring the income on their taxes at the appropriate filing time. 

In addition to offering resources for owner-builders and investors, homebuyers can use our Mortgage House mortgage calculator for free.

Progress Payments and Profits Conclusion

Some progress payments for construction projects include profits. The taxation agencies in Australia do not consider these payments as invoice payments. Thus, they fall into different financial categories. Mortgage House helps owner-builders and investors obtain financing for construction projects. Contact our loan specialists today.

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