The ACT government announced a ground-breaking shakeup to building industry regulation with the aim of protecting reputable builders and sub-contractors from “Phoenix Activity”. Phoenix activity, otherwise known as “phoenixing” is where an indebted company transfers its assets to another company (usually operated by the same director) to avoid responsibilities to their creditors. That’s bad news for their employees, contractors and suppliers – but as a consumer, it can mean your building project goes south and you’re left with a half finished project. Phoenix activity drains the Australian economy of an estimated $3.2 billion. In the building industry, that creditor could be your contract builder, or even you.
What new ACT legislation proposes to achieve
With 43 total reforms, the ACT government (likely to be followed by all regions, including Queensland) proposes changes to licencing, on-site supervision, dispute resolution, procurement practices, building approvals and insolvency claims. The measures will also put an end to the new “phoenix company” operating if there is a history of non-compliance and include automatic licence suspensions.
The ACT Civil and Administrative Tribunal will be given new responsibilities and powers, including handing down penalties, suspension and other disciplinary actions to companies that attempt to avoid debt by way of phoenix activity. Formerly, management of phoenix fraud fell under the Australian Tax Office jurisdiction and Fair Work Building and Construction.
What does this mean for you buying a home in Brisbane?
It’s not always easy to tell if the building company you’ve engaged is reputable. Just like getting a building and pest inspection on a new Brisbane home is vital, choosing the right builder or company is mandatory. In Queensland, the lack of legislation to combat phoenix company activity leaves contract builders, staff and buyers at risk.
“These reforms benefit owners and future owners of residential buildings as well as those builders and industry members that already follow good practices”, Planning Minister, Mick Gentleman
What can you do if you’ve already been a victim of Phoenix activity?
Until the laws in Queensland catch up with the ACT, you can contact Fair Work Building and Construction. While their primary objective is to protect workers owed payment, lodging a complaint with them will trigger an investigation. ASIC Business Checks are designed for suppliers to check the credentials of builders getting materials on consignment however the free app can be used to do a little snooping on your chosen builder before you sign the contract. You can also learn more about your rights as a consumer dealing with an insolvency in ASIC’s consumer section.