Managing employer obligations when winding up a property or construction business

If you're winding up your real estate or construction business, don't overlook your employer obligations.

The end of a business journey is always a weighty moment.

It is the end of what may feel like a lifetime of hard work and effort and it is often filled with reflection of achievements, relationships built and experiences shared along the way.

While it can be an exciting time as you prepare for the next phase of your life, it can also be a minefield to navigate through the various employee obligations to be addressed. If these are not given the consideration they deserve, it can result in missing employee entitlements, ultimately leading to claims and disputes through the Fair Work Commission. And if you’re a director of a company, you could potentially be held personally liable under the Corporations Act. 

However, winding up doesn’t need to be stressful. Start planning early and be mindful of what you need to action and when. Early intervention can help avoid these types of issues down the line.

For real estate and construction companies, winding up can involve additional complexities. These can include: 

• Finalising building contracts.
• Releasing project retentions.
• Managing unfinished developments.
• Ensuring compliance with industry-specific employment and safety obligations.

Common reasons for winding up your property or construction business

There are many reasons that lead to property or construction business owners deciding to wind up the company. Sometimes, winding up is part of a planned exit strategy after completing key developments. Other times, it’s a necessary step due to market shifts, reduced demand, or funding constraints.

Deciding to wind up a company is a major decision. In the property and construction sector, you might face this situation if:

• Your development pipeline has slowed or become financially unviable.
• Ongoing project costs or material shortages have made operations unsustainable.
• You are facing insolvency risks due to unpaid progress claims or supply chain issues.
• There are ownership changes or restructuring across projects or entities.
• You are retiring or transitioning to a new venture.

Steps to wind up your real estate or construction business

While every business will have unique circumstances, most real estate and construction companies should follow similar steps when winding up operations.

Pause new projects

Stop taking on new developments, tenders, or building contracts. This allows you to focus on fulfilling existing obligations such as completing current projects and meeting client or regulatory requirements, without creating new risks.

Review outstanding obligations

Conduct a detailed review of your project contracts, subcontractor agreements, employee entitlements, supplier accounts, leases, and tax obligations. Identify outstanding debts and any assets to be sold, such as plant, vehicles, or real property.

Notify employees and contractors

Construction and property businesses often employ a mix of full-time staff, trades, and subcontractors. Employers need to manage all terminations according to employment law and the Fair Work Act.

• Provide proper notice.
• Pay out accrued leave and superannuation.
• Settle contractor accounts and retainage amounts.
• Issue final pay slips and close contracts transparently.

Due to the complexities of multiple employment types, there are many factors that employers need to be aware of:

• Statutory notice periods.
• Contractual notice periods.
• Redundancy and unfair dismissal protections.
• Industry specific awards.

For example, the Building and Construction Award has unique redundancy schemes and notice obligations that depart from general National Employment Standards (NES) rules.

Best practice would be to classify employees correctly, know the relevant awards and agreements, keep up to date with any legislative changes and to follow the Fair Work Act requirements.

Communicate with clients and suppliers

Notify developers, buyers, or tenants of your intention to cease trading. For projects under construction, ensure all stakeholders are informed and contractual obligations are met where possible. Review contract termination clauses carefully.

Settle debts and collect receivables

Prioritise paying employee entitlements, superannuation, and secured creditors. Recover outstanding invoices, progress claims, or project payments owed to your company.

Manage and dispose of business assets

This could include selling property assets, vehicles, machinery, or intellectual property (IP) such as building designs or project IP. Keep clear documentation for all sales or transfers.

Cancel permits, licences, and business registrations

Cancel or transfer your builder’s licence, ABN, and business registrations once you are no longer operating.

Finalise tax obligations

Notify the ATO of the winding up pay outstanding GST, PAYG, and other tax liabilities, and lodge final tax returns.

Close bank accounts and cancel services

Close business bank accounts and cancel insurance policies, supplier accounts, and other ongoing services.

Prepare for deregistration or formal liquidation

Once liabilities are cleared and assets distributed, you can move to deregister through ASIC or appoint a liquidator if debts remain unresolved.

Employer obligations during the wind-up

When winding up a construction or property development company, employers must meet all obligations to employees and contractors. These include:

• Providing notice: Give written notice of termination in accordance with awards, agreements, or contracts.
• Finalising payments: Pay all outstanding wages, accrued leave, superannuation, and other entitlements.
• Understand tax implications for employment termination payments (ETPs) such as redundancy or severance pay.
• Single touch payroll (STP) finalisation: Lodge your final STP declaration with the ATO.
• PAYG withholding cancellation: Cancel PAYG withholding registration after all payments are finalised.
• Consult with employees: Where required under enterprise agreements, consult employees about redundancy and allow time for them to seek new work.
• Return of assets: Ensure company tools, vehicles, and equipment are returned before final pay.

Additional considerations for real estate and construction employers

• Fair entitlements guarantee (FEG): If your business becomes insolvent and cannot pay entitlements, employees may claim through the FEG scheme.
• Liquidator’s role: A liquidator manages the distribution of assets and ensures employee entitlements are prioritised.
• Industry-specific obligations: Builders and developers must notify relevant authorities (e.g. Building commissions, local councils) of project cessation or licence cancellations.

Legal documents you may need

• Termination notices for employees, suppliers, or clients.
• Deed of termination for ending contracts mutually.
• Asset sale agreements for property, vehicles, or equipment.
• Lease assignment or surrender agreements for project or office sites.
• Release and indemnity deeds to avoid future claims.
• Debt collection agreements to recover outstanding funds.

Common pitfalls to avoid when winding up your company

• Not keeping proper records: You need detailed records of your company’s closure, payments, and communications with all parties.
• Failing to honour contracts: Overlooking legal agreements can lead to claims and disputes. Make sure to check all ongoing contracts and end them properly.
• Missing employee entitlements: Underpaying or not providing final pays can result in Fair Work claims and penalties.
• Trading while insolvent: If you keep operating when you can’t pay your debts, directors may face personal liability.
• Not completing legal deregistration: Unfinished paperwork can mean ongoing ASIC fees, tax obligations, or even being reinstated unexpectedly.

Plan carefully and seek professional guidance to avoid these issues.

How RSM can help

For construction, property development, and real estate businesses, winding up involves both legal and industry-specific obligations. Managing employee entitlements, contractor payments, and project closures correctly can protect your reputation and minimise future liability.

Reach out to your local RSM adviser to discuss your next steps and ensure a compliant, stress-free wind-down for your construction or real estate company.