Building collapse rubble points to ATO blows: Gottliebsen

Major home builder Porter Davis has gone bust with work immediately halted on more than 1500 properties across Victoria, including Mark Anthony’s home. Picture: Ian Currie

A major proportion of the 1300 building and construction companies that have gone into liquidation, receivership or administration since June 2022 had an issue with the militant sections of Australian Taxation Office.

Despite warnings, the ATO actions have became a significant force in the industry devastation.

When the ALP government came to power in May 2022, the ATO told Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones it had some $33bn in uncollected taxes on the books.

The former Coalition government knew that if the ATO was given a free rein to attack the business community to try to collect that money, it would cause carnage particularly in the building industry.

Chalmers and Jones looked at the projected budget deficit and gave the ATO a free rein.

It was typical of what happens in a change of government, but both would now appreciate that simple decision contributed to the destruction of so much of Australia’s future capacity to build homes, let alone cause the suffering of homebuyers and subcontractors.

In previous times when Australia encountered tough economic times, the ATO went out of its way to try and preserve the solvency of taxpayers with instalments and other aids.

And that still applies to many taxpayers who are newcomers to the problem arena.

But those in the $33bn “club” were open to attack and some have pleaded with me that they actually had instalment agreements that the ATO simply tore up in its thirst for blood.

I believe among those companies being put under pressure was Porter Davis.

Like so many other enterprises in the building sector there were also many non-ATO factors that helped sent Porter Davis to the wall.

When I asked the liquidator about the ATO potentially chasing the Porter Davis group for monies, the Grant Thornton national managing partner – financial advisory, Said Jahani, made this comment: “We will be considering the ATO’s position as part of our broader investigation but it is too early in the liquidation to be able to comment on this”.

I got the message.

Companies like Porter Davis in the building and construction industry are very vulnerable to ATO’s attack because of the way it operates and the peculiar nature of “profits” in the industry.

Unlike other more sophisticated tax jurisdictions, in Australia the ATO simply dumps assessments on building and construction people (along with everyone else) without giving explanations.

And they add exorbitant interest rates and penalties so that totally unpayable amounts are put on the building and construction tables.

Yet, because it is a tax assessment the companies are actually liable which makes their financing very dangerous.

The nature of the building industry is such that when you enter a contract you have an anticipated profit, but it is not realised until the deal is completed.

The building and construction industry went through a period of apparent profit, but in fact the profits were not real.

They were rather the precursor for massive losses because the contracts were fixed-priced and inflation-driven costs went through the roof.

Builders and subcontractors suddenly became involved in a desperate struggle to survive and all too often the ATO came bashing on the door asking for money.

Many cash-strapped subcontractors just laughed at the ATO and said “bankrupt us if you want”.

When the ATO started on that process, the subcontractors often simply pulled up stumps and then went into voluntary liquidation.

The ATO will have received some money from its bullying tactics in the early stages of the crisis, but as it got worse there was no money because most had slowed or stopped their payments.

Because the ATO was behaving badly, it often created a sense of hopelessness and other entitlements like building insurance, were ignored.

It’s easy to blame Chalmers and Jones for the ATO contribution to the building catastrophe, but the real blame is with the Coalition government because they knew the tax procedures had to be made fair.

With the help of ALP, people on a Parliamentary committee had undertaken detailed work on the way it should be done.

But in the mire of the last Morrison year, it was simply too hard.

Had they undertaken the necessary actions, it would have reduced the building carnage and people’s suffering and actually raised money.

If the ALP government gets a second term, like the Coalition, they will likely understand the damage that is being created by Australia’s “French justice” in tax affairs – where the taxpayer is assumed to be guilty on the claimed amounts of money owed and is required to prove that the ATO is wrong.

And the carnage will continue because the industry problems have been made worse by a bank credit squeeze.