The Australian Subcontractors Association (ASA) has called for the Federal Government to take action, following revelations that 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 call 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,” Louise Stewart, Australian Subcontractor Association (ASA) spokesperson, said.
“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 business 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,” Ms Stewart said.
“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.”
The ASA 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,” Ms Stewart said.
“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,” she said.
“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.”
*Review of Security of Payment Laws