Govt. investigating “rampant” insolvency in construction industry

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insolvency in the construction industryMost subbies will have experienced the practice of phoenixing, where an insolvent company continues trading under a new entity, leaving behind unpaid subcontractor debts.

Some subbies have faced tens of thousands of dollars in unpaid labour and material costs, potentially crippling their business and livelihood.

So it’s a kick in the teeth when they see those same builders or lead contractors carry on as if it’s business as usual.

One subcontractor TTT spoke with who works in the solar industry said abuse of insolvency in construction is “rampant”.

“Some guys legitimately go out of business however many do it to rip people off and they are doing it again and again and again,” he said, discussing one Sydney builder who stung him and has “done it multiple times”.

“He’s owed some guys over $30k. That’ll send a small business under.”

Asked how to avoid such a scenario our guy said: “It’s a problem. The companies with no assets in their name are especially the ones to watch out for.”

“Something’s gotta change. They should be liable,” he added.

 

Government Inquiry

In 2012, the NSW Government held an inquiry into insolvency in construction with some positive outcomes for sub contractors.

However the Senate Economics Reference Committee has realised that “phoenxing” – as it is known – and abuse of insolvency in construction is still an issue and so is conducting a further inquiry in the second half of 2015 that will feed recommendations to the Abbott government to introduce legal changes to prevent this practice.

“We want to hear from everyone who has ideas about what we, in the parliament, can do to help,” Committee Chair, Senator Sam Dastyari said in an announcement on the Australian Construction Industry Forum (ACIF).

“There are insolvencies that involve no more than a simple refusal to pay bills,” he said, adding “It is often alleged that head contractors have used their subcontractors as cash flow while a project is being built and then refuse to pay on completion.”

Speaking to Tools Trades Toys, a spokesperson for Senator Dastyari said that subbies were an important element of the feedback process.

“What we would like to do is take it out into the community and actually hear from tradies and hear their suggestions.”

“If someone has a story to write about how they got shafted by someone who hid behind a ridiculous law then we want to hear from them.”

Submission can be made here and close 17 April 2015, with a report expected in November.

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Tom is the founder and publisher of Tools Trades Toys. He has been working as an editor and producing content for the trades for around five years. He loves to tell a good story.

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