The building and construction industry is in danger of collapsing unless emergency measures to address delayed and non-payments, such as those already in use by the real estate sector, are put in place.
That’s the message from Australia’s leading SME trade subcontractors, peak industry bodies, security of payments laws reviewers, advocates and builders.
The united group has written an open letter to the Prime Minister, calling for his government to urgently introduce payment reform to protect SME subcontractors and ensure they will be well placed to assist with the rebuilding of the economy once the COVID-19 emergency has passed.
The solution, they say, is simple: implement cascading statutory trusts (CSTs).
A CST is a trust imposed by law that “cascades” down through a string of “deemed” trusts.
The money that is payable to a business down the line is held for the benefit of that business by the business above.
Put simply, CSTs protect payments for all levels in the contractual supply chain – from principals to subcontractors.
“This is a national emergency. Our first priority must be to fix the payment problems in the industry so that the government’s economic stimulus flows through to the tradies that do the work,” says fair-pay advocate, Louise Stewart.
She says the industry can no longer wait and that introducing payment reform would be the greatest single action taken by government since Federation, as it would create a secure environment for contractors and subcontractors in the industry.
“The construction sector is a critical part of a functioning Australian economy, employing approximately 1.2 million people and responsible for 9 per cent of our GDP,” Stewart says.
Paul Williams, Chair of the Australian Subcontractors Association, says, “We need to introduce CSTs now as a way to protect payments that are due to subcontractors, even where a contractor above them becomes insolvent.”
“This is an industry already plagued by illegal phoenixing and changes to insolvency regulations make the ground even more fertile for this type of reprehensible behaviour.”
An industry working group is being formed to commence emergency plans to ensure the implementation of cascading statutory trusts across the industry.
The combined group has called for the federal government to:
• Release the report of the senior officers requested by the Building Minister’s Forum (BMF) to prepare model legislation for the introduction of CSTs across the industry
• Convene an emergency meeting of the BMF to consider and commit to model legislation across Australia
• Make all government payments owing to subcontractors directly to the subcontractors and not to tier one contractors, etc.
• Instruct all public sector construction clients to pay their subcontractors directly pending urgent legislation introducing CSTs
She adds that the Morrison government should not follow the path of the Rudd government’s $16.2 billion Building the Education Revolution (BER) package, one of the stimulus measures implemented following the 2007-2010 Global Financial Crisis.
“Subbies working on school projects perceived the BER projects to be ‘safe’, meaning money was ‘guaranteed’. However, many did not get paid. This time around, let’s not repeat the same mistakes.”