In most construction contracts, retention isn't released in one go at the end of the job — it's released in two stages: a portion at Practical Completion, and the remainder at the end of the Defects Liability period. Retention Track models this directly on every contract using a single percentage — the PC Retention Release % — which controls how the total retention withheld is split between the two stages.

In this article we walk you through:

The PC Retention Release % is a single number set on each contract. It tells Retention Track what share of the total retention withheld becomes claimable when the works reach Practical Completion. The remainder is held until the Defects Liability period ends.

A few examples to make this concrete, using a contract with $10,000 of retention withheld:

The Defects share is always whatever's left over — you don't set it directly. If the PC share is 60%, the Defects share is automatically 40%.

When you create a new contract, the PC Retention Release % is pre-filled to 50% — i.e. half released at Practical Completion, half at the end of the Defects Liability period. This is the most common arrangement in standard construction contracts in Australia, New Zealand and the UK, so you'll usually leave it as is.

If your contract specifies a different split (for example, a 60/40 or 70/30 release), edit the PC Retention Release % field in the Financials section of the contract form before creating the contract.

Retention Track uses two complementary approaches to determine how much retention belongs to each portion:

The split is applied to the total retention withheld on the contract — i.e. the running total of retention accumulated across all invoices, manual journals, and credit notes recorded against the contract.

The formula is:

For example, if a contract has $12,500 of total retention withheld and the split is set to 50/50:

As retention is released back to you — or used (e.g. applied to defect work) — the amount is attributed to one portion only, based on a tag you set in Retention Track at the time the release or use is recorded. There's no percentage split for these amounts; the tag determines where they land in full.

The tagging looks like this in each place:

The remaining outstanding balance for each portion is therefore:

Outstanding (PC) = PC Withheld − PC Released − PC Used

Outstanding (Defects) = Defects Withheld − Defects Released − Defects Used

For more on recording payments and how they affect the balance, see Recording and Deleting Retention Payments.

Each contract carries two milestone dates that, together with the split, drive when retention becomes claimable:

Both dates are set on the contract form in the Financials section, and can be edited later from the contract page.

The PC/Defects split surfaces in three main places.

Open any contract from the Contracts menu in the left sidebar, then look at the Retentions Breakdown card on the contract overview tab. The split appears in two ways:

This gives you an at-a-glance view of how much retention is allocated to each stage, alongside the total amounts withheld and released.

From the Contractors menu, open a contractor and click Export Contracts (or download the outstanding balances report). The Excel spreadsheet now includes five extra columns alongside each contract's outstanding balance:

A totals row at the bottom sums each column so you can see, in one view, how much retention is sitting in each stage across all of a contractor's contracts.

On the workspace dashboard, the Top Outstanding Retention Holdings chart aggregates each contractor's PC and Defects outstanding balances into a single total per contractor. The chart itself shows the combined figure, but the underlying data is sourced from the PC/Defects split so you can drill into each contractor to see how the total breaks down.

Retention Track uses the PC/Defects split together with the two milestone dates to plan upcoming payment claims:

Once a claim is created for a portion, the Receipt Type on any retention payments recorded against it (Practical Completion or Defects) is automatically aligned to the claim's retention type. See Creating a Payment Claim for the full claiming flow.

You can update the PC Retention Release % at any time from the contract's edit page:

The new percentage applies immediately to the total retention withheld on the contract — the Retentions Breakdown badge, the tooltip amounts, and any upcoming-claims figures update straight away.

No — the headline PC Retention Release % is set once per contract and applied to the contract's pooled withheld retention. Individual released or used amounts can be tagged Practical Completion or Defects on a per-line basis, but you can't override the withheld split for a specific invoice. If different invoices on the same contract genuinely need different release timing, the cleanest approach is usually to set up separate contracts.

Yes. Setting it to 100% means the entire withheld retention is claimable at Practical Completion; setting it to 0% means the entire withheld retention is claimable only at the end of the Defects Liability period. Either is fine if that's what your contract actually specifies.

The split is still calculated and the amounts still show on the contract overview and contractor export. The only thing that won't happen is the corresponding upcoming claim being surfaced — Retention Track needs the relevant date in order to plan a claim. You can add or update either date at any time.

No — the PC/Defects classification lives entirely within Retention Track. Xero itself doesn't carry a PC or Defects tag on invoice lines, credit notes or manual journal lines. Instead, for each eligible release/used line on the retention debtors account, you assign a label (Released or Used) and a retention type (Practical Completion or Defects) directly in Retention Track. The withheld portion of those documents stays untagged and is split using the contract's PC Retention Release %. For more on how this works for credit notes specifically, see Creating a Xero Credit Note.

The amounts on the contract overview follow your workspace's display preference — most workspaces show retention exclusive of sales tax (GST/VAT). The contractor contracts Excel export always shows the amounts exclusive of sales tax. Internally, the split is calculated on both the exclusive and inclusive figures so the totals always reconcile.