It is every subcontractor’s nightmare. You did the work. You invoiced. And then you find out the builder has gone into administration, liquidation, or simply vanished.
If you are owed money by a builder who has gone bust, here are your options.
Check if the company is actually insolvent
First, check the company’s status on the ASIC website (asic.gov.au). Search by company name or ACN. If a liquidator or administrator has been appointed, their details will be listed.
If the company is still registered and active, the director may just be avoiding you. In that case, a Letter of Demand or Statutory Demand is your best tool.
If a liquidator has been appointed
- Lodge a Proof of Debt — the liquidator will call for creditor claims. Submit every invoice, contract, and piece of evidence you have. This is your formal claim against the company’s remaining assets.
- Attend the creditors’ meeting — you have a right to attend and vote. Find out what assets the company has and what the likely dividend (payout) will be.
- Check your priority — subcontractors are usually unsecured creditors, which means you get paid after employees and secured creditors (banks).
Ready to put it in writing?
Answer 3 quick questions to check you have the details your document needs, and see your next step.
1. Who did the work?
2. How much is at stake?
3. Do you have it in writing?
Your result is ready. Where should we send it?
Personal liability of directors
If the director allowed the company to trade while insolvent (taking on your work knowing they could not pay), they may be personally liable under s 588G of the Corporations Act. Insolvent-trading claims (Corporations Act s 588G and s 588M) are brought by the liquidator. A creditor can sue the director only with the liquidator’s written consent, or after six months under ss 588R–588T. Give the liquidator your evidence.
Signs of insolvent trading:
- They were not paying other subcontractors at the same time
- ATO debts were overdue
- They took on new projects despite being unable to pay existing debts
- They stripped assets or paid themselves large bonuses before the collapse
State government recovery schemes
Some states have subcontractor protection schemes:
- Queensland — QBCC Subcontractor Financial Protection scheme (trust account requirements)
- New South Wales — Project Trust Account scheme for government projects over $10M
- Victoria — Security of Payment reforms with cascading trusts (coming into effect)
Start your recovery today
Even if the builder has gone bust, you may still be able to recover money from the director personally, from a guarantee, or from a retention trust. The first step is a formal Letter of Demand.
Claim Done drafts your Letter of Demand for $49. We can address it to the company, citing the Security of Payment Act. Done in about 5 minutes.
What happens when you put the builder on formal notice
Same problem. What a prepared case looks like.