Eighty-five building and construction firms go under in a month as sector hit by brittle economy, ATO clampdown

The building and construction industry seems to be bearing the brunt of the brittle Australian economy, with more than 85 companies either entering administration, liquidation or being hit by a winding up notice over the past month in Victoria and New South Wales alone.

Over the past fortnight, Safi Brothers Constructions, Port Melbourne Building Supplies, Coastline Bricklaying and Blue Hills Bricklaying have entered administration. Others to have collapsed of late include plumbers, plasterers and landscape gardeners.

Registered company liquidator, Cliff Sanderson of Dissolve Pty Ltd, says while the building sector always features pretty heavily in the collapse lists, the numbers have increased over the past three to five months.

The reasons, according to Sanderson, are the relatively recent downturn and increased aggression from the Australian Taxation Office.

“An awful lot of tradies couldn’t pay their bills during the GFC, and now the ATO is coming to get them,” Sanderson says.

“Whereas other industries might continue to limp on, small tradies might not have the ability.”

In a recent speech, Commissioner of Taxation Michael D’Ascenzo cited a recent case where a construction company had an activity statement debt of around $400,000 and weaker profits, but worked with the ATO to turn the business around.

“Together we conducted a detailed viability assessment, which included gathering a wide range of information about the company, some supplied by the taxpayer and some we gathered ourselves,” D’Ascenzo said.

“The conclusions of the assessment showed a robust underlying profitability. The company had a strong and reliable cashflow that was very likely to pull it through.”

Master Builders Australia chief economist Peter Jones says uncertainty over where the economy is headed is not helping the sector, which has a higher number of SMEs than other sectors.

“Uncertainty over interest rates and lingering debt issues in the US and Europe are also playing a role,” Jones says.

The recent MBA June quarter 2011 national survey found builders were “increasingly concerned about whether there will be a revival in private sector demand in time to fill the gap being left as Building the Education Revolution, Social Housing and other government stimulus programs are completed.”

While the market was relieved by the Reserve Bank of Australia’s decision to keep rates on hold this week, new home sales released by the Housing Industry Association this month revealed an 8.7% slump for June, to their lowest level since September.

And yesterday’s National Australia Bank survey of SMEs showed that the most significant falls in business confidence were reported in property, construction and finance.

Meanwhile, June figures from the Australian Bureau of Statistics show the seasonally adjusted estimate for total dwellings approved fell 3.5%, following a dive of 6.3% the previous month.

Private sector approvals fell 3.2% in June following a rise of 0.8% in the previous month, while the seasonally adjusted estimate for private sector other dwellings approved fell 4.2% following a slump of 16.2% in May.