Struggling tradies are chasing overdue bills in the lead up to Christmas.
Struggling tradies are chasing overdue bills in the lead up to Christmas. iStock

Subbies face jail for shafting tradies

TOUGH new construction sector payment conditions come into force from Sunday with jail terms for some breaches of the new Building Industry Fairness Act.

New Minimum Financial Requirements to secure a Queensland Building and Construction Commission licence would also come into force from January 1 as the state government moves to crack down on poor payment practices in the industry.

Garland Waddington Solicitors partner Brendan Bathersby said changes were a direct result of the level of bastardry in the construction industry where the first thought appeared to be 'how don't I pay'.

He said the concept of retention money - money held back from payment to cover defects and liabilities - was born out of bad faith that a good job wouldn't be done and not corrected when there was a fault.

Mr Bathersby said no more than 20-30 per cent of payment disputes involved a genuine case of bad work and more generally involved either simply bastardry, cash flow issues or a desire to increase margin.

Under the new laws all payment claims would now be covered by the Act with a payment schedule required to be issued within 15 days of submission unless full payment was intended by the due date.

Penalties would apply where a payment schedule was not supplied, and the full amount not paid by the due date.

Where invoices were not met by the due date, claimants now could immediately exercise their rights to recover money through adjudication. Significant penalties applied where money owed after adjudication decision was not paid.

Changes to the QBCC Act also aimed to ensure money held back from subcontractors in case of defects and liabilities, was paid at the end of a 12-month defects and liability period.

The withholding of retention money after the end of the defects and liability period without reasonable excuse could now result in imprisonment.

New Minimum Financial Requirements laws from January 1 would correct 2014 LNP legislation and give the QBCC great ability to monitor the financial health of companies it licenses.

The changes included annual reporting and requirement for contractor licensees - particularly category 4-7 licensees - to notify the QBCC of significant changes to their financial position.

Mr Bathersby said the strengthened financial reporting requirements would provide greater transparency, help the regulator detect any potential insolvencies and help industry participants ensure the financial health of the business.

He said the new requirements would provide greater clarity about calculating a licensee's assets and revenue, and would restrict accountants from making material changes to reports. Licensees with large revenues would be required to report decreases in Net Tangible Assets of 20 per cent or more, to provide earlier warning of any financial instability.

Additional reforms to raise the standard of financial reporting, particularly for higher risk licensees, would be introduced from April 1, 2019. The Phase 2 reforms include stronger enforcement provisions for those not complying with the minimum financial requirements.

The moves come as James Stewart, the managing consultant for digital collection agency Bill Chaser Pty Ltd reported struggling tradies were chasing overdue invoices to meet pre-Christmas cash flow demands.

Mr Stewart said the business started in late 2017 now had 2000 customers, many of whom were Aussie battler sole trader or small businesses who faced significant personal and business implications due to unpaid bills.

He said trades operated on skinny margins, outlying in advance the significant cost of materials needed for the jobs they were engaged to do.

"Over the past few weeks, there has been increasingly significant demand for Australian tradies to liquidate some of their bad debt prior to Christmas," Mr Stewart said.

"The personal cost of unpaid invoices to tradespeople, sole traders and small businesses nationally is far greater than what Australians realise.

"Just one unpaid invoice can cause Christmas cancellations, business stress and personal or payroll disasters for small companies."