Understanding rental bonds

Rental bonds can cause confusion among landlords and tenants: Whose money is it? Who can access it? Under what circumstances? Does it have to be returned? It’s safe to say that rental bonds are a common bone of contention and a popular cause of disputes. In this article, we unpack the key rules, responsibilities and common misconceptions surrounding rental bonds, so you know where you stand and how to avoid unnecessary conflict.

According to a report from The Property Tribune, one of the most common reasons renters contact the Tenants’ Union or local Tenants’ Advice Services is about bonds. The most common bond disputes are over cleaning costs, repair costs, or financial disputes over outstanding rent or bills.

It has been estimated that around two-thirds of tenants face deductions from their bond. While some lose all their bond, around half lose some of their money – with the leading causes being disagreements about the property condition report, as well as the property not being properly cleaned when the tenant vacates. Another issue relates to property damage and repairs.

As an example, in Western Australia alone, out of 5,414 rental bonds processed in September 2024, tenants forfeited $2.65 million (or 22.2% of all bond money), according to an analysis of the dataset from the National Housing Data Exchange. WA’s Commissioner for Consumer Protection also notes that the number of rental bond disputes has doubled since 2020.

As no-one wants to enter an unnecessary dispute, let’s unpack the who, what, when, where, why and how of rental bonds.

Heads up: This is general information only. Landlords and tenants should refer to the applicable tenancy laws and residential tenancy authority in their state or territory for specific details on all bond matters.

Who

Who pays a rental bond?

Bonds are paid by the tenant(s) named on the lease. In the case of co-tenants, each usually contributes their share of the bond. The bond money is collected by the landlord or property manager and deposited with the relevant bond authority.

Whose money is it?

It is the answer to this question that can be a source of bitter disagreement between landlords and tenants. The bond monies being held belong to the tenant(s). It cannot be accessed by the landlord or property manager, unless they have good reason.

Who can access the bond money?

At the end of the tenancy, the landlord or agent will inspect the property to determine if any damage that the tenant is required to fix (fair wear and tear excepted) has occurred. If the tenant does not owe any rent, has adequately repaired any damage (or modifications), and leaves the premises clean and tidy, they will usually be entitled to receive their bond back. Landlords or agents cannot use the bond money to cover owed rent, damage repairs or cleaning without the permission of the tenant or a relevant authority.

Who can apply for the money to be released?

In some jurisdictions, tenants can apply for the release of their bond monies, while in others the landlord will start the process.

What

What is a rental bond?

A rental bond can be thought of as a security deposit because it provides some financial security for the landlord, in case the tenant does not make good on their responsibilities. It is paid so that there is a sum of money available in case there is a breach of the lease agreement, and it can be used to cover costs for which the tenant may be liable at the end of the tenancy, such as damage to the property, outstanding utility use charges or unpaid rent. The bond is not ‘rent paid in advance’ or the ‘last months’ rent’ – it is a security deposit that is paid upfront and returned at the end of the tenancy. The collection of a bond is not compulsory, but it is standard practice (and some landlord insurance providers, like EBM RentCover, require a bond to be collected before cover is offered – it is a T&C of the policy).

What is the portable bond scheme?

Later this year, New South Wales will become the first jurisdiction to implement a portable bond scheme. Under the scheme, tenants will be able to digitally transfer their bond from one rental property to the next, without having to pay a new bond. This means that tenants will not have to wait for a bond to be released or pay another bond when moving. Under the scheme, the Government will pay any agreed bond claim to the landlord and recover the amount from the tenant. The scheme is expected to be up and running by the end of the year.

What happens if a co-tenant moves out?

If a co-tenant moves out – and they have paid a share of the bond – they and their landlord or agent will need to follow the procedure for bond release in their state or territory. In most cases, the landlord can require the remaining tenants to make up the value of the bond released to the departing tenant.

When

When is a bond paid?

The bond should be paid at the start of the tenancy. The bond cannot be in any form other than money, such as a written guarantee, although it can be paid as a lump sum or possibly in instalments, depending on the bond authority. The money is held in trust until the lease ends.

When is a bond returned?

The bond should be returned to the tenant at the end of the tenancy, unless the landlord or property manager makes a claim against it. A tenant may receive a full, partial or no refund of the bond monies. It usually takes four weeks to get the money released, but may take longer if there is a dispute, or if the paperwork is incomplete or not submitted in a timely manner. For a tenant to get their bond back, they will generally need to: 

• pay their rent on time and in full 

• cause no damage to the property (or have had it adequately repaired) 

• leave the premises clean and tidy. 

An agreement needs to be made about how the bond will be refunded.   

When can a landlord apply to use the bond money? 

A bond covers breaches to the rental agreement caused by the tenant while the property is leased to them. At the end of the tenancy, the bond will be refunded to the tenant in full unless the landlord or agent makes a claim against the money. Landlords can often make a claim against the bond for: 

• rent arrears (rent that is not up-to-date) 

• damage to the property caused by the tenant, their children, pets or guests (fair wear and tear excepted) 

• cleaning expenses (if the rental was not sufficiently cleaned at the end of the tenancy) 

• abandonment of the premises by the tenant, including costs associated with abandoned tenant goods 

• cost of replacing locks or other security devices if the tenant altered, removed or added these without the landlord’s consent 

• reimbursement if the landlord was forced to pay the tenant’s bills, e.g. water bill 

• loss of landlord goods. 

The landlord or agent can only recover an appropriate portion of the bond. Deductions for repairs for damage caused by the tenant need to reflect actual costs incurred, not estimated expenses. 

When can a landlord request another type of bond be paid? 

Whether a landlord can request other types of security deposit depends on the jurisdiction in which the rental is located and the tenancy agreement. For example, landlords in WA may request a pet bond (maximum of $260) as a condition of allowing the tenant to keep a pet at the property (WA is the only state where pet bonds are legal and must be lodged with the Bond Administrator). If a property is fully-furnished, the landlord may be able to request a security bond. A ‘modification bond’ may also be able to be asked for if the tenants have sought permission to make modifications to the premises.  

Where 

Where is the rental bond held? 

The bond is collected by the landlord or property manager and must be deposited with the relevant bond authority in the state or territory in which the property is located (except in the NT where it is held by the landlord or agent). The bond must be deposited within a legislated timeframe and failure to lodge the bond within that timeframe can result in fines and penalties. 

• ACT: Rental Bonds Office, submission required within two weeks (landlords) or four weeks (agents) 

• NSW: Rental Bond Board/NSW Fair Trading, bonds can be submitted by tenant or landlord or agent  

• NT: Security deposits must be held in trust accounts 

• Queensland: RTA Web Services, submission required within 10 days 

• SA: Consumer and Business Services, submission required within two weeks (landlords) or four weeks (agents) 

• Tasmania: Rental Deposit Agency/CBOS, submission required within 10 days 

• Victoria: Residential Tenancies Bonds Authority, submission required within 10 days 

• WA: Bonds Administration, submission required within 14 days  

Where can you get further information on rental bonds? 

For information on rental bonds, refer to: 

• ACT: Revenue Office  

• NSW: Service NSW 

• NT: NT Government 

• Queensland: Residential Tenancies Authority 

• SA: SA Government  

• Tasmania: Consumer Building and Occupational Services 

• Victoria: Consumer Affairs Victoria 

• WA: Consumer Protection WA 

Where do you go if there is a dispute about the rental bond? 

If the landlord or agent and tenant disagree on how the bond should be refunded, the procedure outlined by the relevant government office needs to be followed and dispute resolution process begun. 

Why 

Why should a landlord collect a bond? 

Rental bonds offer landlords a level of protection if their tenants break their lease agreement (e.g. damage the property or fail to pay their rent). The bond provides a financial safety-net from which some costs incurred can be recouped. While taking a rental bond is not compulsory (under tenancy law), as we have mentioned, it may be a requirement if the landlord wants to take out insurance. 

Why is a bond required to be collected as a condition of landlord insurance? 

Bonds offer landlords a level of protection in case something goes wrong at their investment property, and they are left footing certain bills. Landlords should collect any security deposit they are entitled to, as it is in their best interests. Landlord insurance is also about protecting landlords from financial losses. Importantly, collecting a bond is a requirement of most landlord insurance providers as it reduces the amount of potential loss the landlord may need to claim. At EBM RentCover we require landlords to collect a bond equivalent to four weeks’ rent at the time of signing a new lease. If the landlord fails to do this, any claim for loss of rent or tenant damage could be reduced by the amount of the bond that should have been collected, or even refused.  

How 

How much is the rental bond? 

The bond is usually equivalent to four weeks’ rent, though the maximum can vary depending on the state or territory or the type of property being rented, value of the rent, or type of lease. Refer to the relevant bond authority or tenancy legislation for details. 

How does landlord insurance fit in? 

While rental bonds offer landlords a level of protection if their tenants break their lease agreement, in many instances the bond will be insufficient to cover costs and the landlord could be left out-of-pocket, either footing the bills or pursuing the tenants through the courts. Usually, in all but minor cases, the bond is inadequate which makes landlord insurance an important investment. Landlord insurance generally steps in once the bond money has been exhausted (which is why it is important for landlords to collect a bond at the start of the tenancy).  

The bond can be used to recoup certain losses and costs and, once that money is gone, the landlord’s insurance can often be used for the shortfall. Unlike some landlord insurance providers (be sure to check the PDS), at EBM RentCover we allow policyholders to use the bond money to cover expenses that are not covered under the policy, like cleaning, rubbish removal and re-letting fees. But if the bond is not needed to cover additional losses or clean-up, we may deduct the value of the bond from the final payout (as the bond money will be available to the policyholder to cover losses up to the amount held).  

If you have questions about collecting rental bonds or about EBM RentCover landlord insurance policies, please reach out to a member of our friendly Expert Care team – 1800 661 662. 

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.