2012 will be the year of the Carbon Tax. We are all aware of that now and so brace yourself for so much information and misinformation about what the impacts and affect will be on our building industry in Australia.

What is the Carbon Tax?

Simply, it’s a Federal Govt Tax imposed on nominated big businesses who will have to pay for each tonne of CO2 released into the atmosphere.

The purpose behind the tax is supposed to bring about two major changes: 1. It will encourage those big polluters to find more energy efficient and greener means of production. 2. It will fund alternative energy technology that will drive new industries and innovation towards efficient outcomes.

From our building industry perspective and if you do some research on the media articles and press releases produced to date then the issue seems to fall into a single question: How much will the cost of building and construction increase as a direct result of the carbon tax? Because there is no argument from any sector that the cost of construction is going to increase as a direct result of the Carbon Tax.

Over the past decade the building industry, through regulation and other initiatives have begun, in earnest, the process of becoming a more energy efficient industry. Buildings today are more environmentally friendly. Public and business awareness of the need to conserve energy in both production and manufacturing is growing and the general public perception is that: yes, climate change is a concern and that we all have to do our bit.

But as housing affordability is already at the highest its ever been by almost any measure and the industry already slowed by a variety of economic factors how will our industry look 12-18 months from now with more increases in costs?

Lets face it. The cost of construction continues to rise and will go higher again in July.

Even in a weakened economy the cost of construction materials almost never drops. Steel, concrete, glass, aluminium, bricks, plasterboard, paint are all manufactured products that require high levels of embodied energyto create. Transport and logistics are a massive part of our industry and that again will be affected. Time will tell to what extent.

The HIA who have released some early modelling data have indicated that the cost of an average house and land package will rise by between $5000 – $6000 in July, regardless of any cost increases between now and that time. More data from the HIA and MBA will no doubt be forthcoming as they drill down and model the impact on each of the big input items that are used in the building industry.

If you are a licensed builder or about to become a licensed builder then ensure that you take some time to research the impact that this will have on your business. If you are pricing projects that may carry over into  July this year then you need to start thinking about the price of the materials that you will pay for after the switch over. Prices could virtually rise over night so communicate with your customers and your suppliers so that you, as the contractor, do not end up as the financial piggy in the middle.

We will continue to post more information about the Carbon Tax and the Building Industry and will highlight any worthwhile web sites you will find useful. It will likely be one of the biggest issues of the year so stay tuned and be prepared.

In late 2011 the NSW Government passed a range of changes to the Home Building Act 1989 which includes changes to:

• home warranty insurance 
• statutory warranty 
• contract requirements.

These changes will affect all residential building and construction work covered by home warranty insurance but do not apply to claims or to legal proceedings that are pending or finalised.

The changes will commence in two stages, the first took effect on 25 October 2011, while the second will begin on 1 February 2012.

For more details we would recommend you go directly to the NSW Dept of Fair Trading website.

The list of changes according to the NSW Dept of Fair Trading are:

October 2011 changes

• Requirement to notify home warranty insurers in writing;
• Time limits on home warranty insurance claims;
• Claiming outside the home warranty insurance period;
• A notification of a loss includes a ‘related’ loss;
• Ten year limit;
• Definition of completed;
• Definition of developer;
• Proportionate liability;
• Trader–initiated disputes;

February 2012 changes

• Statutory warranty periods;
• Threshold for mandatory home warranty insurance and cooling off periods;
• New small job contracts category;
• Additional home warranty insurance benefits for homeowners;
• Definition of ‘related’ corporations to a builder or developer;

Some of these changes will require some licensed builders in NSW to contact their insurers to review their home warranty insurance policies and review any claims under their insurance that are pending, or that may be forthcoming.

This is very important information that directly affects all NSW licensed builders so we would encourage all our NSW past and present students to familiarise yourself with the new legislation.

On January 1 2011 the (ACL) Australian Consumer Law was introduced.

For more information you can go to the Australian Consumer Law Website.

What’s in it?

1. A national law that sets out unfair contract terms, covering standard form contracts.

2. A national law guaranteeing consumer rights when buying goods and services, which replaces existing laws on conditions and warranties.

3. A new, national product safety law and system for enforcement.

4. A national law to regulate unsolicited consumer agreements, which replaces existing State and Territory Laws on door-to-door sales activity and other direct marketing activity.

5. Simple national rules for lay-by agreements.

6. New penalties and enforcement powers and options for consumer redress which will apply nationally.

The ACL will apply on a national level in all States and Territories. It will be applicable to all Australian Businesses.

In summary, it simply means that every consumer now has the same rights across the entire country and that therefore affects the relationship that licensed builders have with consumers in the market. It would be wise for you to visit the government web site and learn more about what the ACL means to you and your business.

Herald Sun: Drug Test Victorian Workers

In this article the Victorian Premier Ted Baillieu says that random drug testing on building sites will now be considered after concerns raised in the press. Building Company Leaders want new powers to force random drug testing on unionised construction workers amid growing concerns about criminal gangs in the industry.

But Premier Baillieu has suggested that this should be ironed out between unions and employers without conflict.

“It is something that isn’t necessarily adversarial,’’ Mr Baillieu said today.

The Premier said he would prefer to see a situation in the building industry similar to that already in place with airline pilots and truck drivers who are tested routinely.

It’s an interesting article as this issue could ultimately affect the entire building and construction industry on a national level over time, as there are legal and OHS issues at stake.

The Australian: Engineering a Change to Build on Construction

This next article highlights that the manufacturing industry continues to slide, and although the construction industry has slowed in the last couple of years, it will always be there. The ability to re-train and re-skill from outside the building industry to fill the skills gap in this industry will be a critical goal in the years ahead.

The article tells of an Engineer with a background in Manufacturing who now owns and operates his own construction company in Victoria. Claude Salvatore says his father warned him off his interest in construction when he was younger.

“My dad always pushed for me not to be a tradie – he pushed for me to go to school and do better than that.” he said. “I decided to pursue engineering.”

An engineering degree led Mr Salvatore into the manufacturing industry, where he worked for a large bearings company. He now owns a company focusing on new homes, extensions and renovations in Melbourne.

Motivated partly by the obvious signs of a weakening in Australian manufacturing, Mr Salvatore’s career change represents the shift in Australian employment over the past 25 years.

There is strong evidence of the shift amid the housing market as well. One Melbourne manufacturing company told the paper that of the last 10 employees who had left the company over the past two years, eight went into the building and construction industry.

Understanding the trends in our major industry will help us understand the training and skills needs we need to obtain to meet the jobs of tomorrow.

Government regulation affects every one of us every day. You only have to look at the recent budget announcements to see how. It is an onerous task but a critical one to manage your financial risk in light of this ongoing regulation. This article does not necessarilly seek to answer all the questions but to raise awareness and hopefully get you asking the right questions of experts who are there to help solve these compliance challenges.

The Building and Construction Industry is not the only industry with these challenges but it is certainly one of the main ones and so we thought it worthy to talk to some people who know about these things and pass it along in a relevant article.

Are Your Contractors Really Contractors?
 
There are many reasons why licensed builders engage contractors and the most common are:

• The desire for a simple arms length engagement structure.
• Flexibility within the engagement, such as mutual ‘no cause’ termination provisions, etc.
• The engagement falls outside industrial law.
• Evidence that contractors are more productive and task oriented, requiring less supervision and time off.
• Higher skills retention due to project ownership.

Many licensed builders will enter into contracting arrangements without the full knowledge or understanding of the factors that impact upon the engagement, potentially to the detriment of both parties. These can be considered in the following way:

• Do the contractual terms and substance of the assignment reflect the common law characteristics of an Independent Contractor?
• Is the arrangement a Sham Contract (Fair Work Australia Act)?
• Is the arrangement fair to both parties (Independent Contractors Act)?
• Is the arrangement compliant from a taxation perspective (Personal Services Income (PSI) provisions of the Income Tax Assessment Act)?

Industry experience and research shows that most licensed builders would have difficulty answering these questions. It is these questions that we are encouraging licensed builders and in fact every one in the building industry to be conscious of in their contract arrangements.

The ABN Myth!

It is a common misconception that the provision of an ABN by an individual is sufficient to establish their status as an independent contractor. Many building companies wrongly believe that anyone providing an ABN automatically relieves them of statutory responsibilities for PAYG tax and superannuation guarantee contributions. On its own, the holding of an ABN simply means that the individual is registered with the ATO for the purposes of collecting and remitting GST.

Specific taxation and superannuation rulings defer to the common law principles for determination of an individual’s status as employee or independent contractor, and those rulings make it quite clear that an ABN is not automatic presumption of contractor status for the purposes of PAYG and SGC.

Are you Compliant?

If a building company merely relies on the provision of an ABN as validation of a contractors status without knowing absolutely that the arrangement is compliant; then chances are their contract engagements are not providing an appropriate structure and are more likely to expose one or both parties to statutory liabilities and penalties.

Companies and Family Trusts

The ATO is very clear that contractors working for one company only cannot set up partnerships, companies and trusts to reduce their tax liability.

Managing Your Risk

The Personal Services Income (PSI) legislation is very clear in that: An individual providing skilled labour or services only is automatically caught under the PSI legislation.

Having an ABN, company structure or family trust does not convert what is PAYG income into business income.

This is quite a complex issue and we will cover more information in our next article. The message is this. If you are a licensed builder or trade contractor then it is critical that you know your financial and taxation risks in managing your relationships.

One of the first subjects tackled in the course is the issue of insurance. If you are a trade or self employed contractor then you may already understand the necessity of good insurance cover.

Recently, Construction Courses joined forces with FD Beck and Sons, who provide a high quality insurance product and service to our licensed builders and trades. Be sure to check out FD Beck’s Professional Builder’s Construction Insurance calculator.

Unfortunately, the Australian work place continues to remain a litigious and sometimes dangerous landscape. It is vital to understand what your responsibilities as a licensed builder are, and the best risk management processes that ensure you are adequately protected in the event of an accident.

Whilst there is currently a lot of publicity surrounding Builders Warranty Insurance, it is equally important to ensure that your Builders Insurance is appropriate for your needs. Unfortunately, some Builders are under the mistaken belief they don’t require any other insurance other than Warranty Insurance and Workers Compensation Insurance.

Builders Insurance protects you, the builder, against loss, theft, or damage to buildings while they are under construction due to fire, vandalism, wind, lightning and other hazards. Builders Insurance is the coverage that protects the builders insurable interest in the materials, fixtures and equipment being used in the construction or renovation of a building should those items sustain physical loss or damage from a covered cause.

During the construction phase it is the responsibility of the Builder to take out Builders Insurance for the project and should include cover for contractors and sub-contractors involved in the project. 

What sort of Insurance is available?

Just like any other type of insurance the scope of cover available under various Builders Insurance products is extremely broad and varied. Therefore you should first consult an expert broker that has a history in Builders Insurance or Builders Contractors Insurance. 

With that in mind, there are essentially two types or cover available:

1. Annual Construction/Liability Insurance policy, and
2. Job by Job or “One Off” Construction/Liability.

Annual Construction/Liability Insurance covers Builders:

• over the course of 12 months, and
• protects you for all work conducted over the course of 12 months subject to a maximum turnover value over 12 months as well as pre-agreed limit on a per contract basis (i.e. $2,500,000 annual declared turnover subject to a maximum of $750,000 any one contract).

Some of the benefits of taking out an Annual Construction/Liability Insurance policy are as follows:-

• Generally better premiums can be negotiated with insurers for annual policies compared to One Off Construction Liability.
• Continuity of Legal Liability cover as the limit of liability is a blanket cover over the twelve months instead of being purchased for specific contract sites.
• Generally Annual Construction/Liability insurance policies can be extended to provide limit Products Liability cover however the same can not be obtained under a One Off construction policy.

Job by Job or One Off Construction/Liability provides Insurance for Builders on a per contract basis and has specific application to the listed build site. 

When Should You Invest in Builders Insurance?

You should invest in Builders Insurance before any works are undertaken on a site. Being prepared ensures all elements of project have been resolved and that you, as the builder, get the right type and level of coverage. It will also allow the insurance company to get a better understanding of the risk, size and scope of your project. Information such as start date and projected date of completion of each stage of the project, security measures adopted and risk management procedures will all help reduce the applicable Builders Insurance premium.

Protection from 3rd Party Lawsuits

Insurance for your physical assets is one thing, but protection from litigation from 3rd parties is another issue altogether. Therefore whenever you are organizing or reviewing your Builders Insurance you need to ensure that your Public Liability Insurance is tailored to your specific needs. With the ever increasing cost of litigation, if you are not adequately insured you may not be able to afford the legal defence costs, let alone the spiraling awards being made by the courts.

Summary

The temptation for most new licensed builders once they have their licence is to go out and start quoting and working. We would urge you to refer back to your early units in the Certificate IV in Building and Construction Course. It’s essential that your Builders Insurance requirements are tailored to match your risk, and therefore vital that you review all aspects of the cover to ensure you are fully insured in the event of a loss. Remember that it’s too late to seek cover after the event, so ensure your insurance broker provides you with the appropriate cover from the outset so you can get on with the business of building.

Once again for help with your Building Insurance needs, FD Beck and Sons are there to help you.

The primary purpose of SOPA is to provide fairness and protection for contractors in the construction industry. It provides a legal framework to ensure contractors can be paid their outstanding debts. SOPA has now been enacted in the following states:

• Australian Capital Territory
• NSW
• Queensland
• South Australia
• Tasmania
• Victoria

… and now we await WA to soon follow suit.

The construction industry is fragile when a crisis hits – like the Global Financial Crisis. So it’s particularly important that in these difficult times such schemes are available to contractors, or subcontractors, who have valid concerns about the solvency of the main contractor or building company they are contracting to.

There have been a number of cases, particularly in NSW, that have established legal precedents for the SOPA legislation.

To stay up to date with this important function and legislation within the building and construction industry please use the following links to the respective state bodies who manage SOPA at the local level. If you are a contractor who has not been paid for work performed then seek out legal advice and find out what your entitlements are.

ACT
Building and Construction Industry (Security of Payment) Bill 2009

NSW
Building and Construction Industry Security of Payment Act 1999 No 46

QLD
Building and Construction Industry Payments Act 2004

VIC
Building and Construction Industry Security of Payment Act 2002

SA
Building and Construction Industry Security of Payment Act 2009

TAS
Building and Construction Industry Security of Payment Bill 2009

Visit the NSW Department of Fair Trading website for information on the new arrangements.

Fair Trading NSW Home Warranty Insurance

Fair Trading NSW New Home Warranty Insurance

The changes will come into effect in NSW on July 1, 2010.

In NSW, Home warranty insurance needs to be provided by:

• a builder or tradesperson before taking any money (including a deposit) from a home owner (including an owner-builder) under a residential building contract and before starting any work under that contract
• a ‘spec’ builder before starting any residential building work on a property owned by the builder
• a developer before entering into a contract for the sale of a property on which a builder is doing or has done residential building work for the developer
• an owner-builder (ie. a home owner who did owner-builder work under an owner-builder permit) before entering into a contract for sale of the property on which residential building was done within the previous 6 years.

Similar reforms have already occurred in Tasmania and the Victorian system looks set for a shakeup after two of the major insurers recently announced that they would be exiting the market.

The Home Warranty Insurance systems in NSW and Victoria have been surrounded in controversy for many years and it comes as no surprise that change is on the way. Better or worse, please stay up to date and we will continue to post information as it comes to hand.

We want them, we need them. But how are we going to create them?

A recent current affairs program on SBS, Insight, aired a 1 hour show centred around Urban Planning and how to manage the growth of Australia as it stretches from a current population of over 22 Million to an estimated 36 Million + by the year 2050. That estimate could be conservative. The concern was the demographics within that number: The ageing population will grow dramatically as a percentage of the overall total.

The building and construction industry is an important engine of growth for the Australian Economy. Stimulus spending through 2009 by the State and Federal Governments had a role to play in ensuring that engine was kept running. But as we return to steady output due to an apparent shortage of housing, how are we going to find the skilled tradespeople to manage the task of building millions of new homes in the next 40 years. Yes, millions of new dwellings. Our population is ageing and as we all know in the building industry the working life of the average trade is much shorter than in other industries.

The Housing Industry Association, said in a report recently the shortage of skilled workers in residential construction is set to blow out to almost 65,000 nationally by 2012-13. There will be a shortfall of 59,400 construction workers in the 2009-10 year alone, it added.

The government and the building and construction industry must join forces and work for more training, more apprenticeships, and more skilled migration in specific trades. Else we will continue to fall behind in the demand of a growing population for new dwellings.

The latest Housing Industry Association-Austral Bricks Trades Report shows that a surplus availability of tradespeople in the residential sector was a one quarter wonder, reversing in the September 2009 quarter. Although there was a small surplus during 2009 that is no longer the case and if things continue in their current form then it will get tighter.

The HIA-Austral Bricks Trades Price Index inched up by 0.5 per cent in the September 2009 quarter to be 3.1 per cent lower than the comparable period last year.

According to Harley Dale, Chief Economist at the HIA: “With little price pressure, and trade availability still considerably better than it was up until late last year, it is a good time to engage in renovating an existing property or building a new home.”

“The pressing concern is that this situation won’t last and labour shortages will re-emerge by mid 2010 as a major
constraint on the ability of the housing industry to grow both in terms of new home building and renovation activity.”

“It is vital for all levels of government to keep the training of apprentices and trainees as a priority, encouraging young
people to not only start a trade but to complete the training.”

“Failure to constantly address the structural shortage of skilled labour will inhibit the recovery in the housing industry,
denting economic growth and affordability along the way,”

This is a great time to be skilling up, training and developing career pathways in the building and construction industry. Do more courses, gain more licences and qualifications and as a result profit from the growth in our industry. Better yet, encourage others to do the same. Put the word out to your mates. The construction boom is going to be around for a while and everyone needs to look for ways to get more skilled trades on the ground.

It’s always good to know what’s going on in the mind of your customer. If you are a licensed builder or are thinking about getting a Builders Licence then this should make good reading.

As a point of reference this article is based on the NSW Department of Fair Trading Website which hosts the online public register of Builders Licences in NSW. Each state has their own system but most are similar depending on which governing body is regulating the industry in that state.

Here are the links for NSW, Qld, Victoria, SA and Tasmania:

NSW – Fair Trading NSW

QLD – BSA QLD

VIC – Consumer Affairs VIC

SA – OCBA SA

TAS – Consumer Affairs Tas

Basically these government websites are encouraging the consumer to research and check their builder out thoroughly prior to entering into a contract. That only makes sense. This is why we stress the importance of training for builders and trades, as well as compliance and proper licensing.

Here is the type of thing you can expect your customer to request if you are a building or trade contractor:

• Provide a copy of your current licence. (This can now be checked against online databases)
• Provide details of any other or previous licences held. You may actually be asked this question by a customer and you are compelled by law to comply.

The consumer can then use this information to go online and check a contractor’s history of disciplinary action, insurance claims, and Consumer, Trader and Tenancy Tribunal Orders not complied with.

This is a quote from the NSW Fair Trading Website when advising consumers:
“You should always do a licence check before entering into a contract with a builder or tradesperson and you should only deal with a licensed builder. Any person who carries out residential building work worth over $1,000 in labour and materials content without an appropriate licence is breaking the law and could be prosecuted.”

The internet is a source of information for consumers to do sound research on you, so get trained, be compliant, ensure you are properly licensed and know the rights of your customers.

At Construction Courses we strive to bring the Building and Construction Industry the best information and training available to ensure you get ahead. Call us any time on 1300 855 713 to find out how we can assist you.