Renovation contingency and variations: how much to set aside and how to control changes

Set aside a contingency of roughly 10% for straightforward work and 15% to 20% for older homes, structural work or incomplete plans, as an illustrative rule of thumb rather than a legal or industry standard, and keep it in your own budget rather than in the builder's contract. Most overruns come from variations: changes to the scope after signing, whether you ask for them or the builder finds something unexpected. Every state expects variations on regulated contracts to be agreed in writing, with the price and time effect stated, before the work is done. Control variations and the contingency usually stretches far enough.

This guide is part of worked estimates and checklists.

Why renovations go over budget

Cause	Example	Can you reduce it?
Hidden conditions	Rotten floor joists under an old shower, termite damage, out-of-plumb walls	Partly: inspections and asbestos tests before quoting
Owner changes	Upgrading tiles, adding a niche, moving a power point	Yes: decide finishes before signing
Low allowances	Prime cost or provisional sums set below realistic prices	Yes: check allowances before signing
Compliance requirements	Certifier requires extra fire separation or smoke alarms	Partly: get advice at design stage
Design gaps	Drawings do not show the stair balustrade or rangehood duct	Yes: more complete documentation
Market changes	Materials price rises on long jobs	Partly: ask how the contract handles them

Sizing your contingency

Situation (illustrative guide)	Suggested contingency
Cosmetic work in a newer home, finishes chosen	Around 5% to 10%
Kitchen or bathroom, same layout, house built after about 1990	Around 10%
Older home, walls opened, asbestos possible	Around 15%
Structural work, extension or second storey	Around 15% to 20%
Incomplete drawings or many provisional sums	20% or more

Worked example (illustrative)

A $60,000 bathroom and laundry in a 1970s house. You choose 10% because finishes are fixed but the house is older, then add $2,500 of outside-contract costs (council fee for a minor approval, short-term storage).

Contingency: $60,000 x 10% = $6,000.
Total budget: $60,000 + $6,000 + $2,500 = $68,500.

If an asbestos test before work is likely, enter it as the fixed buffer in the contingency calculator. For a pre-1990 house you might raise the percentage to 15%, giving $60,000 + $9,000 + $2,500 = $71,500.

What counts as a variation

A variation is any change to the work, price or time in the contract. There are two kinds:

Owner-requested variations: you ask for something different or extra.
Builder-requested variations: the builder says extra work is needed, for example because of a site condition or a certifier's requirement.

State contract laws set out how they must be handled. In general:

The variation should be in writing, describing the work.
It should state the price change (including GST) and the time effect.
Both parties should sign before the work is done, except in genuine emergencies that the law or contract allows.
The builder should not be paid for a variation that was not agreed properly, except in limited circumstances set by your state's law.

In Victoria, the Domestic Building Contracts Amendment Act 2025 introduces a single variation process for major domestic building contracts, whether the owner or builder requests the change, once it commences (by 1 December 2026). In NSW and Queensland, the contract and the legislation also require variations to be in writing. Check the current rules with your regulator.

A simple variation log

Keep your own record alongside the builder's.

No.	Date	Description	Requested by	Price change incl. GST	Time change	Signed
1	Week 3	Replace rotten joists under shower	Builder	+$1,800	+2 days	Yes
2	Week 5	Upgrade to frameless screen	Owner	+$900	0	Yes
				Running total +$2,700

Subtract each signed variation from your contingency. When half the contingency is gone, stop discretionary upgrades.

Keeping control

Decide before signing. Choose tiles, tapware, cabinetry and appliances before you sign, so allowances become fixed prices.
Price the unknowns. Ask builders to quote rates for likely hidden items (for example, replacing a metre of floor joist) so variations are priced on agreed rates.
No verbal yeses. A site conversation is not a variation. Ask for it in writing.
Watch the margin. Many contracts add a margin to variations and to overruns on prime cost and provisional sums. Know the percentage. See prime cost and provisional sums.

Mistakes to avoid

Telling the builder the size of your contingency.
Approving variations by text message without price and time stated.
Spending contingency on upgrades early, then having nothing left for hidden defects.
Forgetting that variations change your progress payments and may change insurance requirements if the price passes a threshold.

FAQ

Is a contingency the same as a provisional sum?

No. A provisional sum is an allowance in the contract for work that cannot yet be priced. A contingency is your own reserve, outside the contract.

Can a builder refuse a variation?

Generally yes, if it is outside their licence, not possible to build or would affect compliance. The contract sets the details.

What if the builder does extra work without my written agreement?

Ask for the variation in writing and get advice before paying. State laws limit when builders can recover payment for unagreed variations.

Should contingency include GST?

Yes, if the contract price you base it on includes GST.

Sources

Consumer Affairs Victoria — 2025 domestic building contract reforms, including variations
Building and Plumbing Commission (Victoria) — contracts and disputes in Victoria
Building Commission NSW, via NSW Government — variations and contracts in NSW
Queensland Building and Construction Commission — variations under regulated contracts
Asbestos and Silica Safety and Eradication Agency — testing before renovation