Australian Subcontractors In Crisis Unless Governments Act Now

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Updated: March 4, 2019

Peak body calls for urgent intervention.Thousands of Australian subcontractors continue to be forced into insolvency due to building and construction companies that are failing to pay, despite government attempts to address the issue.

The Australian Subcontractors Association (ASA) is calling for the Federal Government to step up and take responsibility before it’s too late. It follows the latest company collapse of one of Australia’s oldest engineering firms – RCR Tomlinson, which will have a major impact on thousands of subbies.

“When it comes to the collapse of companies that rely on subcontractors to undertake the work, the domino effect can be devastating. Unfortunately, the subbies are often left to fend for themselves,” said Louise Stewart, Australian Subcontractor Association (ASA) spokesperson. “When companies fail to pay subcontractors for work done, the subbies still have to pay employee entitlements and taxes.”

A 2015 Senate inquiry into insolvency found that the industry is burdened every year by an estimated $3 billion in unpaid debts, including subcontractor payments. In 2018 alone there have been 1642 construction businesses that have become insolvent. A high percentage of these is attributed to misconduct.

“Sadly, non-payment issues have long plagued the industry – as evidenced by the subcontractor to RCR Tomlinson that has lost $9 million due to the company not paying for work done,” said Ms Stewart. “We have been advised by subbies that RCR has been delaying payments as far back as 12 months in order to prop up its own cash flow. And it’s unlikely any of these subcontractors will see their money.”

Ms Stewart recounted the story of one of the subcontractors, a family-owned business, that has lost millions of dollars because of RCR delaying payments for over a year. “The two couples are devastated,” she said. “It has decimated their business, meant hundreds of employees will be laid off, and both couples stand to lose their family homes.”

Time To Take Action

The ASA has called on the federal Minister for Small Business, Michael McCormack to take action to protect subcontractors “all the way down the supply chain in the event of an insolvency”.

“The Federal Government review by John Murray* has already made recommendations for cascading statutory trusts to be rolled out across the industry; however, there has been no further action,” said Ms Stewart.

“When Craig Laundy was Minister for Small Business, he said if state governments did not act before the end of the year, the Commonwealth would take action. We are still waiting for that to happen.”

Ms Stewart said national legislation is needed and either cascading statutory trusts or cascading project bank accounts must be mandated. “The Queensland government is certainly taking the lead on this and has made project bank accounts a legal requirement.

“However, greater responsibility needs to be taken at all levels. Governments need to act to legally impose these solutions and ensure contractors pay subcontractors rather than spending their money.”

About The Australian Subcontractors Association

The Australian Subcontractors Association (ASA) is the peak industry body that represents the interests of subcontractors and suppliers in the building and construction industry.

It provides support, information and fairness to subcontracting businesses.

*Review of Security of Payment Laws.

For more information visit http://www.asaonline.org.au