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Government moves on SME subcontractor protections

The government has announced it would look further into protections for small businesses involved in subcontracting in one of the industries where they are most vulnerable.

Government moves on SME subcontractor protections
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Earlier this week, the government released the final report of its review of security of payment laws within the building and construction industry.

It made 86 recommendations to improve consistency in security of payment legislation as well as enhance protections to ensure subcontractors get paid on time for work they have done, regardless of which state or territory they operate in.

One was to make security of payment laws nationally consistent with the NSW security of payment legislation, commonly known as the East Coast model.

Another recommendation was to implement a deemed statutory trust model to be applied to all parts of the contractual payment chain for construction projects over $1 million, plus a program of industry-wide education and training.

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell supported the recommendation, saying all parties involved in the contractual chain should be protected, not just the first layer of subcontractors.

“We know the construction industry has a track record of poor payment practices and insolvency,” Ms Carnell said.

“Statutory trusts will go some way to alleviate the problem of subcontractors not being paid as the result of illegal phoenix activity.”

Minister for Small and Family Business, the Workplace and Deregulation Craig Laundy said more needs to be done to protect subcontractors and small businesses.

He noted that payments in the construction industry are on average 26.4 days late and account for 20 to 25 per cent of all insolvencies.

“More needs to be done to harmonise the various state and territory security of payments laws so that businesses and subcontractors operating in the building and construction industry are not required to be across several complex pieces of legislation at any given time,” Mr Laundy said.

“More also needs to be done to ensure that where payments are protected this protection flows through the entire contractual payment chain, not just to the first tier of building industry participants.”

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