There are few sights more unsettling for a homeowner than a half-built house. The slab is down, the frame is standing and the mortgage repayments have already begun — then, suddenly, the builder is gone.
For a growing number of Australians, that scenario is no longer an unlikely worst case.
Industry reporting based on ASIC data recorded 1,522 construction insolvencies in NSW during the 2025–26 financial year to 28 June, only slightly below the 1,552 recorded over the comparable previous period. Nationally, 3,435 construction companies entered external administration during that period.
The problem is not new, either. ASIC reported that construction accounted for 27% of companies entering external administration in 2023–24, making it the largest single industry category.
For anyone preparing to sign a building contract, those numbers deserve attention. If a builder becomes insolvent, an owner can be left juggling an unfinished property, continuing loan repayments, insurance claims and the difficult task of finding another builder willing to take over someone else’s work.
Why is construction being hit so hard?
There is no single explanation. Builders have spent several years dealing with tighter margins, rising materials and labour costs, financing pressure and contracts that do not always make it easy to pass those increases on to customers. When cash flow is already stretched, a delayed project, unexpected cost or unpaid account can quickly become a much bigger problem.
ATO enforcement is adding another layer of pressure. The Tax Ombudsman reports that more than 84,000 Director Penalty Notices (DPNs) were issued in 2024–25, affecting directors of approximately 64,000 companies — 136% more than in the previous financial year. DPNs can make directors personally liable for certain unpaid company obligations involving PAYG withholding, GST and superannuation guarantee amounts.
That does not mean 84,000 notices went to construction companies, nor does it establish that ATO enforcement caused NSW’s 1,522 construction insolvencies. The notices were issued across the economy. What the figures do show is that businesses already carrying tax debt now face a considerably tougher enforcement environment.
| Pressure point | What is happening | Why homeowners should care |
| NSW construction insolvencies | 1,522 recorded in 2025–26 to 28 June | Builder failure is a genuine financial risk |
| Industry exposure | Construction remains one of Australia’s hardest-hit insolvency sectors | The problem extends well beyond a handful of troubled firms |
| ATO enforcement | More than 84,000 DPNs were issued in 2024–25 | Tax arrears can intensify pressure on already struggling businesses |
| Incomplete work | Insolvency can bring construction to an abrupt halt | Owners may need another builder to finish the home |
| HBC cover | NSW provides last-resort protection for eligible residential building work | Cover is valuable, but conditions and limits apply |
| Progress payments | Paying ahead of completed work increases financial exposure | Every payment milestone deserves careful attention |
What happens if your builder becomes insolvent?
The natural reaction is to find another builder and get construction moving again. Unfortunately, it may not be that simple.
Before new work begins, owners need to establish what has happened to the existing contract, document completed and defective work, consider notification requirements and understand their insurance position. NSW’s home building compensation arrangements operate as a last-resort safety net where eligible residential work cannot be completed or defects cannot be rectified because of events including builder insolvency.
The Home Building Compensation Fund can therefore be extremely important, but it is not unlimited protection. Historical NSW scheme material identifies maximum cover of $340,000 for non-completion and defects combined, subject to applicable policy and statutory requirements.
Then there is the money already paid. An IPART review identified a straightforward but important risk: the more an owner has paid compared with the actual value of work completed, the greater their potential financial loss if the builder fails.
That is why the contract and payment structure matter long before anything goes wrong. Before substantial money changes hands, homeowners should be asking:
- Is the builder appropriately licensed, and is the required HBC cover in place?
- What work must actually be completed before each progress payment becomes due?
- Does the work on site justify the amount currently being claimed?
- What does the contract provide for insolvency, delays and termination?
- What happens to incomplete work if the builder can no longer continue?
- Who needs to be contacted immediately if construction stops?
The worst time to start looking for those answers is after the trades have disappeared and the building site has fallen silent.
Flash Conveyancing Advice
If your builder appears to be in financial difficulty, resist the urge to make a progress payment simply because you fear the company may collapse. First check what has actually been completed against the contractual milestone and obtain appropriate advice before terminating the contract or bringing replacement trades onto the site. If insolvency has already occurred, protecting your contractual and insurance position should come before rushing to restart the build.
The unsettling thing about construction insolvency is how quickly an exciting property project can unravel.
One week, you are planning rooms and choosing finishes. The next, phone calls go unanswered. Trades stop arriving. Work sits exposed to the weather while mortgage repayments continue. Before long, you may be dealing with an administrator or liquidator, an insurer and clauses buried in a contract that you never expected to use.
That is where Flash Conveyancing can help clients understand the property and contractual side of the transaction before an already difficult situation becomes harder.
Led by Julian & Renee, Flash Conveyancing assists with property transactions throughout NSW. Their approach is personal and practical: reviewing the contract and title documentation, identifying unusual or potentially problematic conditions and helping clients understand what they are committing to before serious money is on the line.
That attention is particularly valuable for house-and-land and new-build transactions, where the land purchase, finance arrangements, building contract, insurance requirements and construction timetable can all overlap. What looks straightforward in a sales brochure can become considerably more complicated once the legal documents arrive.
Flash Conveyancing assists clients across Sydney, Newcastle and Wollongong, including areas within Blacktown, Hawkesbury, Blue Mountains, The Hills, Hornsby and Parramatta council areas.
Julian & Renee also work with clients in Acacia Gardens, Angus, Arndell Park, Blacktown, Colebee, Glendenning, Glenwood, Grantham Farm, Kellyville Ridge, Kings Langley, Marsden Park, Melonba, Oakhurst, Parklea, Quakers Hill, Riverstone, Schofields, Seven Hills, Stanhope Gardens, Tallawong, The Ponds, Baulkham Hills, Beaumont Hills, Bella Vista, Castle Hill, Kellyville, Kenthurst, North Rocks, Northmead, Rouse Hill, Vineyard, Windsor, Annangrove, Box Hill, Cattai, Dural, Gables, Galston, Glenhaven, Glenorie, Maraylya, Middle Dural, Nelson, North Kellyville, Norwest and Winston Hills, as well as elsewhere across NSW.
More than 1,500 NSW construction insolvencies in a year should not be dismissed as background industry noise. For buyers and homeowners, it is a warning worth taking seriously.
You cannot guarantee that a builder will still be operating tomorrow. What you can do is understand the contract, the property and your position before signing today. Flash Conveyancing is here to help you do exactly that.
