Back-Charged for Something That Wasn't Your Scope? A NZ Subcontractor's Response Playbook

sp8002
May 31
4 min read

A back-charge is the head contractor deducting an amount from your payment for something they say is your cost. Under the Construction Contracts Act, a deduction has to be justified in a payment schedule. Here is how to push back when it isn't.

By Steve Parker · Trueworks · NZ construction contract review · 6 min

What you'll learn

The lawful way a back-charge has to be made
The back-charges that do not stand up
Your step-by-step response, up to adjudication

Quick answer: A back-charge is the head contractor deducting an amount from your payment for something they say is your cost — a defect, damage, a delay, a clean-up. Under the Construction Contracts Act 2002, a deduction from a payment claim has to be set out in a payment schedule, with the reason and the basis for it. A back-charge with no payment schedule, no substantiation, or for something outside your scope is open to challenge — and because the Act runs on "pay now, argue later", you can pursue the withheld amount through adjudication.

Back-charges are a standard pressure tactic on busy sites. Some are legitimate — you did damage something, or leave a mess that another trade had to clear. Many are not — a margin grab dressed as a deduction, a delay that was not your fault, or a "defect" outside your scope. The Act gives you a clear way to separate the two.

The lawful way to make a back-charge

A head contractor who intends to pay you less than your payment claim must issue a payment schedule that states the scheduled amount and, where it is less than claimed, the reason for the difference and the basis

on which it is calculated. A back-charge is a withholding, so it has to appear in that schedule with its reasoning. A deduction that simply turns up as a smaller payment, with no schedule and no explanation, has not followed the Act.

The back-charges that do not stand up

No payment schedule at all. If they paid less than claimed without a valid schedule in time, the claimed amount can become a debt due.
No substantiation. A back-charge with no breakdown — a round number for "rectification" — is unproven.
Outside your scope. A deduction for work or damage that was never your responsibility under the subcontract.
Not your delay. A delay back-charge where the cause sat with the head contractor or another trade.

Double recovery. Charging you for something already covered elsewhere.

Your response, step by step

Compare to scope. Put the back-charge against your subcontract scope. If it is outside scope, that is your lead point.
Demand the basis. If there is no payment schedule, say so in writing — that failure has consequences. If there is, ask for the substantiation behind the figure.
Answer in writing. State which back-charge you dispute, why, and the scope or facts that defeat it. Keep it about the documents, not the personalities.
Reserve your position on the withheld sum. Make clear you are not accepting the deduction.

Refer to adjudication if it stalls. A disputed back-charge is exactly what adjudication is for — a binding decision in 20 to 40 working days.

Send Trueworks your subcontract and the disputed item. You receive a written, code-cited assessment of your entitlement under the Construction Contracts Act — the clean paperwork an adjudicator rewards. NDA available; files NZ-hosted. → Email steve@trueworks.co.nz
or start at trueworks.co.nz

Variation gone unpaid, or a back-charge you dispute?

The pay-when-paid point

If a back-charge is really the head contractor passing on a problem from above — "the client docked us, so we are docking you" — note that conditional payment terms are void under the Construction Contracts Act. Their dispute up the chain is not your deduction.

FAQ — Back-charges for NZ subcontractors

Is a head contractor allowed to back-charge me? Only properly. A deduction from your payment claim must appear in a payment schedule with the reason and basis. A back-charge with no schedule or no substantiation is open to challenge.

What if there was no payment schedule? If they paid less than your compliant claim without a valid payment schedule in time, the claimed amount can become a debt due and recoverable.

Can they back-charge me for another trade's damage? Not legitimately. A back-charge has to be for something within your responsibility under the subcontract. Damage or work outside your scope is not yours.

They say the client didn't pay them — does that justify it? No. Pay-when-paid and pay-if-paid clauses are void under the Construction Contracts Act. Their upstream dispute is not a lawful deduction from you.

How do I challenge a back-charge? Compare it to your scope, demand the basis in writing, dispute it on the documents, and refer it to adjudication if it does not resolve.

How Trueworks helps

Trueworks tests a back-charge against your subcontract scope and the Construction Contracts Act — whether it was made through a valid payment schedule, whether it is substantiated, and whether it is even within your responsibility. You get a written, code-cited account of which deductions stand and which you can challenge.

About Trueworks

Trueworks is built by Steve Parker — 20 years on the analytical side of NZ construction: variation reviews, contract advisory, and AI-augmented document analysis. It is the same defensible, code-cited read a quantity surveyor would give a variation, made available to the homeowners and trades on the receiving end of one. I answer every email personally during pilot phase.

steve@trueworks.co.nz · trueworks.co.nz