The Australian Subcontractors Association (ASA) is calling for the Federal Government to step up to assist Australian subcontractors facing insolvency due to building and construction companies’ failure to pay.
The call comes after the collapse of one of Australia’s oldest engineering firms – RCR Tomlinson, expected to 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,” ASA spokeswoman Louise Stewart said.
“Unfortunately, the subbies are often left to fend for themselves. 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 1,642 construction business that have become insolvent.
Ms Stewart said the organisation had been advised by subcontractors that RCR had been delaying payments as far back as 12 months in order to prop up its own cash flow.
Ms Stewart recounts 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 says. “It has decimated their business, meant hundreds of employees will be laid off, and both couples stand to lose their family homes.”
The ASA has called on Small Business Minister 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,” she said.
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.”