The Australian building and construction sector is experiencing unprecedented levels of financial distress. ASIC’s latest data (February 2025) reveals 7,485 insolvency cases this financial year, that is, a staggering 47.11% increase year-on-year. Construction specifically has seen insolvencies spike by 27.24%, making it the most vulnerable industry.

Why Are Builders Struggling?

Construction insolvencies don’t just happen overnight. A combination of factors is at play:

• Fixed-Price Contracts: While appealing to clients, these contracts can be a financial time bomb when costs rise unexpectedly.
• Supply Chain Disruptions: Post-COVID delays, shipping issues, and material shortages have caused major bottlenecks, delaying projects and inflating costs.
• Labour Shortages: With skilled workers in high demand, builders are paying top dollar for labour, further squeezing margins.
• Poor Cash Flow Management: Many businesses overextend themselves, failing to balance their books before taking on new projects.

For residential builders, the challenges are even steeper. Ongoing supply chain constraints make it difficult to access essential building materials, leading to project delays, financial strain, and in some cases, insolvency.

Directors Beware: Insolvent Trading Can Cost You Personally

Under Section 588G of the Corporations Act 2001 (Cth), directors have a legal duty to prevent insolvent trading. This means if your company takes on new debt while unable to meet existing obligations, you could be held personally liable for those debts. The ATO’s Director Penalty Notice (DPN) program has expanded, with increased notices issued to construction company directors in the past six months.

Key Strategies for Builders & Suppliers

For Builders:

• Implement rolling 13-week cash flow forecasting (weekly updates)
• Renegotiate all fixed-price contracts using the new Relief of Contract Provisions (Building Industry Act 2024)
• Establish material price escalation clauses with specific triggers (e.g. CPI+5% threshold)
• Engage restructuring experts before financial issues escalate

For Suppliers:

• Implement strict credit limits based on real-time project monitoring
• Register all PPSR securities within 15 days
• Require progress claim verification via third-party quantity surveyors
• Get professional guidance on risk management and creditor protections

How Levi Consulting Can Help

At Levi Consulting, we specialise in business recovery, corporate turnaround, restructuring, and insolvency. We’ve guided builders and suppliers across NSW, VIC, QLD, and TAS through financial distress and helped them avoid liquidation when possible.

David Levi, Registered Liquidator, is a trusted expert in the building and construction industry. As a member of ARITA and TMA Australia, he provides practical, real-world solutions to businesses in distress.

Need a confidential discussion? Call David Levi on 0418 602 466 or book a free Zoom consultation today.