Building sector faces more collapses ahead of Christmas

Queensland’s troubled construction sector is expected to see more insolvencies in the lead up to Christmas amid material shortages and delays. FULL LIST of insolvencies for October.

Queensland’s troubled construction sector is expected to see more insolvencies in the lead up to Christmas amid material shortages and delayed payments.

Revive Financial director Jarvis Archer said his firm was receiving more inquiries from the construction industry with an increasing number of contractual disputes as well as clients and builders holding back payments. “This is causing some subcontractors cash flow difficulties and making projects unprofitable,” said Mr Archer.

A total of 47 Queensland companies entered liquidation or administration in October, including RRR Constructions, Skywings Aviation and Great Northern Tools.

He said as well as navigating financial difficulties, businesses in the construction industry had the further challenge of meeting their financial reporting criteria to the Queensland Building and Construction Commission (QBCC) as deadlines loom.

Another issue appeared to be delays in starting work on contracts signed last year because of slow development approvals and material delays

Mr Archer also has seen increased inquiries from business owners and their accountants about assistance with tax debts.

“Some of these are trading businesses where, despite their best efforts, the owners feel their situation worsening,” said Mr Archer. “Various locations, especially in areas suffering from reduced tourism, are experiencing stress in their retail and hospitality industries.”

The ATO usually pauses recovery action during December so businesses with tax debts proactively managing their tax affairs with an affordable payment arrangement, shouldn’t experience any ATO action for the time being.

More trouble looming in the construction sector

Another concern was that once borders opened and demand returned, overseas supply issues may prevent them from having stock to sell. “It’s potentially a double whammy for businesses, such as those in retail, that may have more demand from customers, but limited items to sell in the lead up to Christmas and following months,” he said.

If they haven’t already done so, business owners should review cashflow forecasts, or their ability to pay their expenses and debts through the Christmas period.

Pitcher Partners insolvency specialist Andrew Yeo said the number of companies being placed under external control dropped to almost zero when Covid-19 first hit last year and when the rules around being forced into administration were altered temporarily.

The numbers over the past year had now stabilised at about half of the usual pre-Covid figure, as the Australian Taxation Office stepped back from its role in enforcing the collection of outstanding tax debts.

Mr Yeo said staff in the ATO’s enforcement area were redeployed to other, more pressing tasks in the early days of the pandemic, and about the time they came back into their usual debt recovery roles, lockdowns were announced in the eastern states, and a light-touch approach was again employed. Mr Yeo said there had been “little or no pressure” in the system from the ATO, but warned that it would come, and that companies which had outstanding tax debts should consider being proactive and talking to an adviser or the ATO before they came looking.

The ATO was usually responsible for about half of the winding up applications across Australia, Mr Yeo said, and that number had dropped to just a handful. “The ATO has now recommenced the engagement process,’’ he said.