Labor pledges $4.5m in ‘subbies income fund’ if they win next election

Federal Labor will pledge cash to go after unscrupulous builders who burn their companies and start new ones to avoid paying their debts in a bid to protect subbies.

FEDERAL Labor will pledge cash to go after unscrupulous builders who burn their companies and start new ones to avoid paying their debts.

Opposition Leader Bill Shorten is set to unveil the pre-election policy announcement in Townsville today, in the wake of a Bulletin campaign revealing subcontractors have lost more than half a billion dollars to 50 collapsed building companies since 2013.

Labor said if it won Government it would create a $4.5 million “subbies income fund” for subcontractors to access if they fell victim to illegal phoenix activities.

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Leader of the opposition Bill Shorten. Picture: Zak Simmonds

Mr Shorten, in Townsville with Shadow Assistant Treasurer Andrew Leigh, also plans to pledge a new $7 million “tradie litigation fund” to help fund court actions against companies and directors who have left them out of pocket.

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The pledges follow one from the LNP State Opposition yesterday, when coalition leader Deb Frecklington committed to establishing a Commission of Inquiry should she successfully win power at the next State Election in just over 20 months’ time.

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Queensland Leader of the Opposition Deb Frecklington. (AAP Image/Dan Peled)

Federal Labor said phoenix activity, where company directors deliberately folded their company and rebirthed it to avoid debts, cost the Australian economy more than $5 billion per year.

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It said the litigation funding would go to the Australian Securities and Investments Commission, enabling it to run more difficult court cases without draining existing resources.

“Not only will this give tradies their day in court, it will also act both as a punishment and deterrent for dodgy directors,” the party said in a statement.

The Subbies Income Fund would be used for the development and implementation of a national scheme to ensure no subcontractors or small businesses were left out of pocket from phoenixing.

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“People who deliberately burn their companies should be subject to the full consequences of failing directors’ duties, including being liable for compensation, fines of up to $200,000 or five years behind bars.”

The Subbies Income Fund would be used for the development and implementation of a national scheme to ensure no subcontractors or small businesses were left out of pocket from phoenixing.

It would work in a similar way to the Queensland Government’s newly-introduced project bank accounts. It would require Commonwealth projects to have project bank accounts which use cascading statutory trusts, ensuring all businesses involved get paid on time.

“We will set up an efficient process for handling disputes and establish a federal security of payments legislative regimen based on the recommendations of the Murray Review,” Labor said, adding it would work with the states and territories to harmonise schemes nationwide.