When you’re working on big projects, there’s always the threat of a builder going bust. So, what can you do to protect yourself? The team at Master Electricians offer some advice.

Electrical contractors often get the rough end of the stick when it comes to payments – late, missing, retention money held back, or the worst case – hearing that the builder has gone into administration.

When you’ve done the work and paid for your materials, wages and on-costs, it’s a shock to the system to find out you won’t be getting paid.

Construction regularly records the highest number of company failures of any sector in Australia. The 2023–2024 financial year data from the Australian Securities and Investments Commission (ASIC) indicates that around 1,952 construction companies entered insolvency, the highest number of company failures of any sector (27.5%) and more than a quarter of all corporate insolvencies nationally.

Despite this, Australia urgently needs more infrastructure – homes, schools, hospitals, road/rail and of course the energy transition with solar, batteries and EV chargers. If the electricians and other subcontractors who deliver that work cannot rely on being paid, the whole system is put under strain.

There have been genuine attempts to fix these issues, including numerous reviews in security of payment issues along with iterative state and territory security of payment law reforms.

These law reforms have included retention and project trust accounts, maximum payment timeframes and rapid adjudication of payment disputes. Yet, subcontractors in the construction sector are still going unpaid.

In 2025, Master Electricians Australia (MEA) led an industry survey across multiple subcontracting sectors throughout Australia which confirmed non-payment, including non-return of retention money, remains an issue – including following builder insolvency.

Despite the best intentions of various governments around the country, there isn’t a scheme that guarantees payment to subcontractors when a head contractor becomes insolvent.

Australian subcontractors still find:

• Payment timeframes blow out beyond what the legislation intended;
• Retention is slow to return or held back for reasons unrelated to genuine defects;
• Bank guarantees or bonds tie up capital and can be difficult to recover; and
• When a builder collapses even if there is a project trust account, there may not be enough money in the account to cover amounts owing.

For electrical businesses, unpaid invoices mean wages for the business owner may not be paid, leading to additional stress on home finances and mortgages.

MEA continues its advocacy, calling for four practical reforms that would improve protection for electricians and other subcontractors. These practical reforms are:

One clear National Security of Payment framework

We should have a consistent national framework of security of payment protections. Often referred to as ‘harmonised security of payment laws’, this would mean one core set of rules for payment claims and adjudication across Australia, with less confusion for contractors who work across different states and territories.

MEA wants a harmonised approach that would take the best elements of existing state and territory systems and lift the national baseline, while still allowing for some local tailoring where genuinely necessary.

A central, rental-bond-style retention holding scheme

Instead of builders having to establish and administer their own retention trust accounts, retention money would be better protected if paid into a central scheme administered by a government authority, like residential tenancy bond systems. Performance security (e.g. bank guarantees) could also be held centrally, making it easier to obtain return of these.

This would provide:

• Clear visibility of retention balances;
• Simple online processes for payment in and out; and
• Greater certainty that retention is still available if the head contractor fails.
• An additional benefit is if there is a dispute about return of retention or security, the builder would be the party to lodge an adjudication application, not the subcontractor. MEA often hears from subcontractors who are reluctant to bring an application for small amounts for fear of losing future work. Reversing the onus of bringing an application would remove this fear.

Fairer rules on retention and practical completion

Current practices often push unnecessary risk and cost onto subcontractors. We would support changes that:

• Allow subcontractors to substitute bank guarantees with cash retention at any time (and vice versa, which is already permitted in some states), so they can free up working capital and reduce reliance on expensive, open-ended guarantees; and
• Prevent head contractors from linking return of retention or security to events outside their control (e.g. head contractor practical completion, or another subcontractor’s completion of work), so subcontractors are not disadvantaged in receiving retention or security back.

A Fair Entitlements Guarantee – a safety net for subcontractors

Employees of insolvent companies may be able to access the Fair Entitlements Guarantee (FEG), which provides a limited safety net for unpaid employment entitlements. Subcontractors doing the on-site work currently have no equivalent scheme for payments owing, despite these payments effectively representing wages for small business owners.

MEA would like to see a national scheme, modelled on the FEG, that would allow eligible subcontractors to claim payment for work properly completed but unpaid because a builder has become insolvent. Such a scheme could include reasonable caps on claims, exclude related-party arrangements, and use independent, rapid assessments of amounts claimed.

A safety net of this kind would recognise that for many small electrical businesses, unpaid invoices are akin to wages. It would also allow a federal regulator to pursue directors where appropriate, discouraging poor behaviour and phoenixing.

Why this matters now

Australia currently faces a huge pipeline of housing, energy and infrastructure work at the same time as construction insolvencies remain elevated, and skills shortages persist. If we want a strong electrical contracting sector that can deliver this work, we must ensure that electricians and other subcontractors are paid for the work they perform.

Stronger protections as outlined in this article would not remove all risk, but would substantially reduce the likelihood that subcontractors are left unpaid when a head contractor fails.

Important disclaimer: This article provides general information only and is not intended to constitute legal, financial or other professional advice. Electrical contractors should obtain independent advice about their specific contracts, rights and obligations.
Master Electricians Australia is an Australian Association for Electrical Contractors. We provide technical, safety and workplace relations advice to members, as well as advocate for the electrical industry. To find out more visit – www.masterelectricians.com.au/membership