Labor to boost financial protection for subbies and small businesses

It’s vital to protect the livelihoods of small businesses, workers and subcontractors who fall victim to dodgy building bosses and ensure perpetrators face their day in court, writes Shadow Assistant Treasurer Andrew Leigh.

QUEENSLAND One Homes collapsed in 2017, owing more than $5 million. Fencers, roofers, electricians and painters were left out of pocket.

The liquidator’s report detailed debts of $380,000 to the Federal Government, $90,000 to the State Government, and millions of dollars of debt to Gold Coast small businesses.

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Allegations of “phoenixing” have also been referred to the corporate regulator, ASIC. Phoenixing is defined by the Australian Taxation Office as when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts. The practice is not illegal.

Over recent months, The Courier-Mail’s “Back Our Subbies” campaign has highlighted dozens of cases in which subcontractors have been ripped off, paid late, or not at all. Australia is notoriously bad for late payments to small businesses.

One global comparison report found Australian payments were overdue an average of 26 days.

When building industry figure John Murray reviewed the industry in 2017, three-quarters of construction firms told him that they regularly got paid late.

Framing a new building. Photo: iStock

If there’s a change of federal government this year, subbies will get a better deal. Labor’s Tradie Pay Guarantee will establish a new requirement for large Commonwealth construction projects that would see project bank accounts established that use cascading statutory trusts, ensuring that all businesses down the supply chain get paid on time. We will then work with the states and territories to harmonise schemes across the country, with the aim of ultimately covering all large construction projects – public and private.

As well, a $7 million Tradie Litigation Fund will be created for subbies to access justice and see regulators take dodgy bosses to court and win.

The Tradie Pay Guarantee and the Tradie Litigation Fund sit alongside our existing initiatives. Two years ago, Shadow Employment Minister Brendan O’Connor and I announced a Labor Government would require all directors to have a Director Identification Number. Unlike when you open a bank account, director registration doesn’t currently require a 100-point identification check. As one expert put it, the laws are so lax “you could almost register your dog as a company director”.

A DIN is backed by the peak director groups, building groups, insolvency groups and trade unions.

Plumber fixing under the sink in the kitchen. Photo: iStock

At a state level, the State Government has moved decisively, establishing a Special Joint Taskforce, headed by retired Supreme Court Judge John Byrne to investigate building company collapses.

Queensland’s security of payment laws places it ahead of many other states in tackling phoenixing. We’re keen to work with the Palaszczuk Government to ensure that all jurisdictions are closing the loopholes currently being exploited by a dodgy few.

On one estimate, phoenixing costs the Australian economy in excess of $5 billion per year, which is more than $200 for every person in Australia. We reckon it’s probably more than that, since misbehaviour in the building industry saps trust and confidence. Talk to subbies who’ve been ripped off, and they’ll tell you that it doesn’t just affect their finances, sleep and relationships – it also makes it harder to trust people on the next job.

It’s vital to protect the livelihoods of small businesses, workers and subcontractors who fall victim to dodgy building bosses and ensure perpetrators face their day in court.

A Shorten government will Back Our Subbies.

Andrew Leigh is the Shadow Assistant Treasurer