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Tradies payments guarantee

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Labor today announced a policy to ensure small businesses in the commercial construction industry get paid for work they have completed.

There is around $3 billion in unpaid debt in the commercial construction industry each and every year.

This debt is mostly owed to small and medium sized businesses in the construction subcontracting chain and has dramatic and occasionally tragic consequences for businesses, families and communities left to pick up the pieces following insolvency and bankruptcy events.

The construction industry suffers more than most from phoenix operators - those who won’t pay their debts, strip valuable assets from their companies and then send them into liquidation, only to rise from the ashes debt-free and at liberty to inflict further financial damage on the industry.

In the construction industry, far too many sub-contractors have outstanding invoices that are often months overdue or simply never paid. This situation creates spiralling debt problems, cash flow problems and in the worst cases, insolvency. In recent years, over one in five companies entering external administration were construction-related.

Labor has consulted with subcontractors, sole traders and other small businesses in the construction industry and the message is clear: a new approach is required.

If Labor is elected, we will introduce a federal Security of Payments framework as recommended by numerous inquiries, including the Cole Royal Commission and a recent Senate Economics References Committee report. Rapid dispute resolution for payment adjudication will ensure small construction businesses receive income that is rightfully theirs.

Reducing insolvency and improving cash flow is good for small businesses, good for workers and good for the economy.

In addition, a Shorten Labor Government will formulate and trial a regime of Project Bank Accounts on major Commonwealth government projects. These Project Bank

Accounts will ensure payments flow from the top of the supply chain all the way to the bottom, where the majority of small businesses perform their work.

In the United Kingdom, Highways England has successfully used project bank accounts to reduce the waiting period for subcontractors from over 60 days to less than 7 days on major road projects. Australian state governments in Western Australia and New South Wales are also trialling this payment mechanism.

Labor favours a uniform national approach to this problem. We will trial this payment mechanism and direct the Australian Law Reform Commission to undertake a review, to evaluate the effectiveness of this process to promote better cash flow and whether this is appropriate for the private sector.

There are hundreds of case studies where contracting business are left out in the cold for work completed because those higher up the supply chain are speculating, trading insolvent and delaying payments. Unpaid work is simply unfair.

With contract work becoming more prevalent in a number of industries, this is the right policy to adjust to changing labour and industrial marketplaces. Ensuring businesses and workers get paid is a fundamental role for any government.

More information about Labor’s plan can be found here

FRIDAY, 17 JUNE 2016