Construction insolvencies ‘may decrease for remainder of FY23–24’, Master Builders predicts
The association says the building and construction sector is proving resilient but says the ATO must show flexibility with the payment of taxes and charges.
Master Builders Australia has made a raft of recommendations for strengthening businesses operating in the building and construction industry ahead of the Federal Budget, with the industry still navigating a complex landscape.
In its pre-budget submission, Master Builders said insolvency numbers still remain high for the industry, which is the result of unanticipated escalations in the cost of labour and materials at a time when so many businesses were locked into fixed-price contracts.
The industry experienced its highest ever monthly total during August 2023, with over 300 construction businesses entering external administration, the submission noted.
However, Masters Builders said the industry has largely remained resilient despite this.
“Latest ABS data on entry and exits for 2022–2023 shows the number of building and construction businesses shrunk by only 0.1 per cent despite a record-high year of corporate insolvencies,” it said.
“There were fewer insolvencies during September and October. During October 2023, building and construction accounted for over a quarter of insolvencies compared to over a third in earlier months.”
Master Builders said it is anticipating a decrease in insolvencies for building and constructions businesses over the remained of this financial year, with businesses having worked through the bulk of their loss making contracts.
“Government and public sector entities, including the ATO, must play a role in safeguarding the financial viability of the industry through practices including fairer risk sharing in contract design and allowing flexibility when it comes to the payment of taxes, charges and other costs,” the Association said.
It also called for the development of additional resources and guidance materials made for, and in consultation with, industry regarding any requisite changes to industrial laws and modern awards.
“Where relevant, funding should also be allocated for additional resources and development of guidance materials for and in consultation with business regarding any changes following passage of the Fair Work Legislation Amendment ‘Closing Loopholes’ Act 2023 or any further elements of the Fair Work Legislation Amendment Closing Loopholes Bill,” the submission stated.
It has also urged the government to retain current incentives regarding negative gearing and the capital gains tax (CGT) discount, as these incentives dampen rental costs and expand the supply of rental accommodation.
It also said that no principal residences should be subject to any additional taxes (like CGT).
“Foreign investment should be leveraged in a way that expands the supply of new homes as well as associated infrastructure,” the submission added.
“All special charges, taxes and levies imposed on foreign investors (mostly at state and territory level) should be waived for transactions which support new home building activity or infrastructure development."
