Subscriber onlyTHE building sector's habit of "robbing Peter to pay Paul" has to end, according to an industry veteran who last year headed a Federal Government inquiry into security of payment for subbies.
John Murray AM, an experienced building adjudicator, made more than 80 recommendations for new laws to ensure subbies received more timely payment from builders.
The recommendations included a system of cascading statutory trust accounts, which would work similarly to trust accounts set up by solicitors and travel agents to hold money for clients.
"At the moment, a head contractor who receives payment from a client can use that money to fund other projects, pay its own creditors or buy vehicles," said Mr Murray.
"The days of subcontractors giving such interest free loans to contractors has to stop."
The review found that 72 per cent of Australian subcontractors in the building and construction industry were being paid late on at least 40 per cent of their invoices.
"This is an industry known for being undercapitalised with lots of phoenixing," he said. 'Phoenixing' is the creation of new companies to avoid paying creditors. The practice is not currently illegal under Australian law..