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Australia’s construction sector is facing a staggering downturn, with 2,832 building
companies undergoing insolvency appointments in the 2024 financial year alone,
according to ASIC data. That marks a 28% increase from the previous year and
underscores the immense pressure facing the industry.
From major names like Porter Davis to mid-tier players like Ian Cubitt’s Granny Flats, the fallout is hitting homeowners, suppliers, subcontractors, and the wider economy.
Richard Stone is a Partner in RSM’s Restructuring & Recovery division and has led complex insolvency and turnaround engagements across construction, healthcare, agribusiness, and professional services. Known for his pragmatic approach and deep technical expertise, Richard regularly advises directors, lenders, and government agencies on navigating financial distress and preserving enterprise value. As a senior figure in RSM’s national restructuring team, he shares first-hand insight into the perfect storm affecting the construction sector – and why it's not over yet.
Key Highlights
Record number of builder insolvencies across Australia
Fixed-price contracts vs soaring labour and material costs
Homeowners left with unfinished homes and no protection
Case studies from Richard’s own appointments
Urgent calls for better director education and regulatory reform
The Rise (and Fall) of Fixed-Price Contracts
Many of the collapses stem from one critical issue: fixed-price contracts that were signed pre-COVID and are now wildly out of sync with post-pandemic costs. "It seems ridiculous that 5 years on we are still talking about COVID but the reality is, projects that once had a margin have zero profit now. Builders go back to principals, try to renegotiate better rates, but if just one says no, it can force the builder into administration," says Richard.
Case Study
In 2024, Richard was appointed to Ian Cubitt’s Granny Flats that were experts in constructing age-friendly self-contained homes and housing extensions across New South Wales and the Australian Capital Territory for 30 years. More than 120 projects were frozen mid-way. Homeowners were left staring at unfinished backyard dwellings, home offices and granny flats for months. "We eventually secured a sale to a similar builder, but that still meant renegotiating contracts at higher prices. It was an anxious time, frustrating and stressful for everyone involved."
Porter Davis, Langford Jones Homes, and Probuild followed similar patterns — large volumes of incomplete projects, funding gaps, and limited protection for consumers. Each collapse left hundreds, sometimes thousands, of homeowners stranded midbuild, with deposits paid and construction halted. In many cases, there was no clear pathway for finishing their homes without significant additional cost.
The Forgotten Homeowner
"There is very little protection for mum and dad homeowners," Richard warns. Deposits go into general bank accounts, not trust accounts. So, if a builder collapses, those funds are gone. There is no automatic right for the home to be completed, no guarantee on pricing, and limited options for recourse. The lack of mandatory trust accounts or insurance protections for deposits meant that consumers bore the brunt of the financial and emotional fallout. These events have highlighted critical gaps in consumer safeguards within the residential construction industry and reinforced calls for urgent reform.
The Flow-On Impact: Suppliers, Subbies and the Economy
The knock-on effect of these insolvencies is immense. Subcontractors relying on a single builder are exposed. Unpaid invoices lead to a domino effect across the supply chain. Even unions are stepping in to advocate for more secure employment structures to give workers access to FEG (Fair Entitlements Guarantee) protections.
Could It Have Been Prevented?
Regulators like ASIC typically act after the fact, Richard notes. "They’re looking in the rear-view mirror. By the time changes happen, it’s often too late."
There’s also been criticism of the lack of barriers to entry in the building industry. "All you need is a ute and a shovel," one industry body told Richard. "That’s not sustainable."
Policy Reform and Industry Education
Richard is calling for stronger safeguards around who can legally direct and manage a building company—and with good reason. As it stands, there are no mandatory qualifications for directors in the construction sector. A person can run a multi-million-dollar building business without the ability to interpret a balance sheet or understand basic financial risk. This gap in financial literacy contributes to poor cashflow management, under-provisioning for employee entitlements, and ultimately, insolvency.
While the introduction of the Director Identification Number (DIN) is a step in the right direction—making it harder for individuals to engage in phoenix activity by setting up and liquidating companies under different names—it doesn’t go far enough. The DIN helps identify repeat offenders but doesn’t prevent them from making the same mistakes in the first place.
What’s needed is a mandatory baseline of financial education for directors—particularly in high-risk industries like construction. Directors should be equipped to read financial statements, understand their obligations under the Corporations Act, and make informed decisions about solvency and employee entitlements. Without this, both creditors and workers remain exposed, and schemes like the Fair Entitlements Guarantee (FEG) become a backstop for avoidable mismanagement.
By lifting the bar on director education and accountability, Australia can begin to shift from reactive cleanup to proactive prevention.
What Can Builders and Subcontractors Do?
Richard's advice:
- Build contingencies into costings
- Avoid rigid fixed-price contracts where possible
- Know your numbers and seek help early
- Use Safe Harbour provisions to get advice before it’s too late
"The earlier you ask for help, the more options you have."
Where to From Here?
The housing supply crisis won’t fix itself. Nor will the building sector survive without reform - the crisis gripping Australia’s construction industry has been created by the perfect storm of fixed price contracts, record material costs, supply chain challenges, labour shortages and extreme weather events.
"We’re dealing with a market under pressure from all sides. Interest rates, planning delays, cost escalation, and skills shortages are converging. We need smarter systems to protect both homeowners, builders and suppliers."
“Anyone in any sector, that is facing serious financial difficulty needs informed and sensitive advice. Our experts are trained to recognise the warning signs of financial problems and provide solutions to resolve them...the sooner you reach out, the more support we can offer you.”
Need support? Speak with Richard Stone or your local adviser today.
