SME subcontractors seek payment reform to avoid building industry collapse

Prominent SME trade subcontractors, peak industry bodies and builders have joined forces to warn of the impending collapse of Australia’s building and construction industry if issues of payment delays and non-payments aren’t urgently addressed.

The united group has called on the government to enact emergency measures, similar to those the real estate sector has adopted. They see cascading statutory trusts (CSTs) as a straightforward solution to protecting everyone in the contractual supply chain, from principal developer to individual subcontractors.

“This is a national emergency. Our first priority must be to fix the payment problems in the industry so that the government’s economic stimulus flows through to the tradies that do the work,” Louise Stewart, former chair of a subcontractors’ association and cuurent CEO of construction payment protection platform ProjectPay, said. “We urgently need the support of all governments to keep as many tradies afloat as possible. As part of relaxing the insolvency laws, we believe the federal government has an obligation to put in place protections for the public and subcontractors to ensure they get paid.”

Stewart pointed out that the building industry provides employment for over 1.2 million people and that it is responsible for nine per cent of Australia’s GDP.

Paul Williams, Chair of the Australian Subcontractors Association, said, “We need to introduce CSTs now as a way to protect payments that are due to subcontractors, even where a contractor above them becomes insolvent.

“This is an industry already plagued by illegal phoenixing and changes to insolvency regulations make the ground even more fertile for this type of reprehensible behaviour,” Williams added. “That’s why it’s more important than ever to expedite the introduction of statutory trusts. It’s a proven solution: the real estate industry has been using such trusts for years.”

Stewart is adamant that forcing subcontractors to take on more debt to continue operating is not the answer. “Many of these SME businesses work on lean margins and do not have the capacity to take on more debt, given the payment problems in this industry,” she said.

The group has also called on the federal government to:

  • Release the report of the senior officers requested by the Building Minister’s Forum (BMF) to prepare model legislation for the introduction of CSTs across the industry .
  • Convene an emergency meeting of the BMF to consider and commit to model legislation across Australia .
  • Make all government payments owing to subcontractors directly to the subcontractors and not to tier one contractors, etc.
  • Instruct all public sector construction clients to pay their subcontractors directly pending urgent legislation introducing CSTs.

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