Failed Qld construction firm owes $70m as taxman circles

A troubled Brisbane construction group has accumulated debts of more than $70m, including a huge chunk owed to the taxman who now wants his money.

Creditors of a troubled Brisbane construction group that has accumulated debts of more than $70m will be asked to approve a rescue plan for the company this week.

Duncan Clubb and Jeffrey Marsden, of BDO, were earlier this year appointed administrators of Shafston Avenue Construction Group, after it ran up large debts to the Australian Taxation Office and other creditors.

The company founded by developer Murray Thornton almost a decade ago had been involved in a series of high-profile projects including the Tallowwood townhouse development at The Gap and Lincoln on the Park at Greenslopes. Creditors are due this Friday to vote on a deed of company arrangement for the group that could see it recapitalised or restructured.

The company is still party to several contracts however no work has been performed since it entered administration.

According to a report to creditors filed with ASIC by Mr Clubb, the group owes the Australian Taxation Office about $15m, debt accumulated after financial support provided by related companies was not provided.

A spokesman for Mr Thornton said he had ceased being a director of group companies in June 2021 and that while he remains a shareholder has had no direct involvement in the companies. Current director William Rhodes declined to comment.

Brisbane developer Murray Thornton remains a shareholder

In his report, Mr Clubb said the group employed a business model that meant it undertook construction work on behalf of related unit trust companies which were then invoiced.

“The business model was unsustainable as the companies invoiced the unit trust companies for the incurred costs of the construction work with little or no additional margin for their provided services,” said Mr Clubb in the report.

He said that as the group continually carried large amounts of work in progress on its books it appeared solvent. “However, this is a misleading metric because the companies did not convert this work in progress into liquid cash at any stage,” he said.

“Despite the companies being balance sheet solvent, they were only able to do so by relying

on arrangements with related parties in terms of funding or invoicing.”

Financial support previously supplied to the group was not forthcoming to address the significant tax debts, including GST liabilities, prompting the director to call in administrators.

“Attempts were made by the companies to enter into a payment arrangement with the ATO and some payments were made,” Mr Clubb said.

However in October, the ATO issued the director with a penalty notice warning of the group’s inability to address the outstanding GST liabilities sufficiently.

“The GST liabilities incurred leading to the appointment of administrators was the trigger for the company’s solvency issues,” he said.