Action needed to prevent non-payment of subbies

The Australian Subcontractors Association (ASA) is urging the federal government to provide better protection for subcontractors following the collapse of engineering firm RCR Tomlinson.

According to the ASA, thousands of Australian subcontractors are forced into insolvency due to building and construction companies that fail to pay, and ASA spokesperson Louise Stewart said these issues have “long plagued the industry”.

In the case of RCR Tomlinson, which announced it was entering into voluntary administration last week, one subcontractor is owed $9 million for work completed. Stewart continued: “We have been advised by subbies that RCR has been delaying payments as far back as 12 months in order to prop up its own cash flow. And it’s unlikely any of these subcontractors will see their money.”

A 2015 Senate inquiry into insolvency found that the industry is burdened by an estimated $3 billion in unpaid debts annually, including subcontractor payments, and over 1600 construction business have become insolvent in 2018 alone.

“When it comes to the collapse of companies that rely on subcontractors to undertake the work, the domino effect can be devastating. Unfortunately, the subbies are often left to fend for themselves,” said Stewart. “When companies fail to pay subcontractors for work done, the subbies still have to pay employee entitlements and taxes.”

The ASA called on Minister for Small Business Michael McCormack to take action to protect subbies in these events. Stewart highlighted the need for greater responsibility at all levels, and suggested the nation should follow the Queensland Government’s lead of making project bank accounts a legal requirement.

“Governments need to act to legally impose these solutions and ensure contractors pay subcontractors rather than spending their money.”

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