It is anticipated that more large construction companies across Australia will fold this year. This means that thousands of sub-contractors, tradies and would-be new homeowners will find themselves being vulnerable victims as a result of the impending business closures.

The prediction comes as Gold Coast construction giant Condev was forced to appoint a liquidator as market and material costs threaten the company’s bottom line.

The Queensland firm called a last-bid meeting on Monday with developers from around the country in a bid to raise cash for ongoing operations.

Unfortunately, the meeting did not provide the solution thought to be around $25 million for Condev, forcing founders Steve and Tracy Marais to begin placing the business in voluntary administration.

Hopeful homeowners who had unluckily picked the wrong construction company won’t escape the financial bomb.

Queensland couple Nicole and Daniel Jacobson have been forced to shell out an extra $130,000 to finish their home, after the building company they signed with, Privium Group, who has recently collapsed.

After trying really hard to find a new builder, they were shocked with a six-figure bill increase because the cost of materials had spiralled since they signed with Privium, Mr. Jacobson said it had been an extremely stressful situation.

The couple who have three children are now struggling to pay for rent and a mortgage at the same time because timelines on the build have completely blown out.

Nicole Jacobson also confessed that Privium didn’t even contact them to tell them they were going bust and only found out via social media.

Many other Privium customers had not been lucky enough to find a new builder, she said, and they were now “priced out of the market”.

Dyldam Developments, Hotondo Homes franchise Tasmanian Constructions, ABD Group, BA Murphy, Pindan and Inside Out Construction are some of many construction companies that have all gone bust over the past few months.

The increase in cost of materials, Covid-19 restrictions, supply problems and labour shortages had created “a perfect storm” now battering the construction industry, the Gold Coast-based founder of Association of Professional Builders Russ Stephens confessed.

“We’ve seen increases in the cost of materials between 15 to 20 percent throughout 2021.That was then compounded by the supply crisis which has caused delays, and that’s increased the fixed costs for these builders as well,” says Russ Stephens.

Australia’s recent housing boom had also driven prices of materials and labour up. However, the uptick in building appears over, at least for now.

Building approvals across the country collapsed in January, according to Australian Bureau of Statistics data, down 27.9 percent from December.

“The decline was much larger than economists had expected,” says Diana Mousina from AMP Investments.

January approvals were 24.1 percent lower in comparison to figures recorded from the same time period of 12 months ago.

Ms Mousina predicted approvals would “track sideways” over the next few months, adding the reopening of Australia’s international border should result in positive approval activity on a 12-month horizon.

The ATO Reveals That There Is A Large Number of Unpaid Construction Tax Bills

The Australian Tax Office (ATO) has revealed that over the duration of the covid-19 pandemic, Construction-related businesses have built up a mountain of unpaid tax bills.

This means that there is the potential for a huge number of business failures to occur in 2022 that could take otherwise-healthy creditors down with them, insolvency practitioners warn.

Last year outstanding debts to the ATO increased by almost one-third to $58.8 billion last year over the two years affected by the pandemic, while over the same time court wind-ups of businesses – half of which are typically triggered by the ATO – fell by three-quarters.

The covid-19 pandemic has generated a huge headache for the ATO, which has tried to assist companies through tough trading conditions. In its 2021 annual report the ATO said it collected $11.5 billion in revenue, below its own $15 billion target, for reasons including a cautious approach to compliance.

However, for industries such as building, where ATO enforcement plays a big role in weeding out poorly run companies and supporting the health of the industry as a whole, this was a problem, said John Winter, chief executive of the Australian Restructuring Insolvency & Turnaround Association.

“It is a huge moral hazard issue. It provides no mechanism to signal to the market that you shouldn’t build up debts you can’t pay,” says John Winter, chief executive of the Australian Restructuring Insolvency & Turnaround Association.

The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)

Post Author: Craig Dangar

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