- Queensland subcontractors have specific legal rights when a principal contractor enters liquidation — but you must act quickly.
- Lodge your proof of debt with the liquidator promptly; late lodgement can mean you miss distributions entirely.
- Retention money held under the QBCC Act may be protected in a separate trust account — check immediately.
- A valid PPSA registration (Personal Property Securities Act) can give you priority over unsecured creditors.
- The liquidator works for all creditors, not for you — you need your own advice to protect your position.
When a builder collapses in Queensland, subcontractors are often the last to hear about it and the hardest hit. You have outstanding invoices, tools and materials on site, and no clear idea of what happens next. Understanding your subcontractor rights in a builder liquidation in Queensland — and acting on them immediately — is the difference between recovering some money and recovering nothing.
The construction sector accounts for approximately 27% of all corporate insolvencies in Australia. In Queensland alone, hundreds of builders, contractors, and construction companies enter liquidation every year. The subcontractors left behind are typically unsecured creditors by default — sitting at the back of the queue when assets are distributed. But the law does give subcontractors specific tools to improve their position. You just need to know how to use them.
What Happens When a Builder Goes Into Liquidation?
When a company enters liquidation under Chapter 5 of the Corporations Act 2001 (Cth), a registered liquidator is appointed to take control of the company’s affairs. The liquidator’s job is to:
- Identify and collect the company’s assets
- Investigate the company’s conduct (including potential insolvent trading claims against directors)
- Pay creditors in the order of priority set out in the Corporations Act
- Report any misconduct to ASIC
The liquidator is not your advocate. They act in the interests of all creditors as a group. Subcontractors who assume the liquidator will take care of them often find, months later, that they have received cents in the dollar — or nothing at all.
The moment you learn a builder has entered liquidation, the clock starts. Here is what you must do.
Step 1 — Lodge Your Proof of Debt
A proof of debt is your formal claim to the liquidator for the money you are owed. If you do not lodge a proof of debt, you will not receive any distribution from the liquidation — regardless of how clear-cut your invoice is.
The liquidator will send creditors a proof of debt form (Form 535 or similar) early in the liquidation. You complete this form with:
- The total amount you are owed (including GST)
- Supporting documentation — signed contracts, tax invoices, delivery dockets, variation approvals
- Any security you hold over the debt (PPSA registration, QBCC retention trust — see below)
Deadlines for proof of debt vary. In a creditors’ voluntary liquidation, the liquidator will specify a date for proofs in their initial circular. Do not miss it. Late lodgements may still be accepted at the liquidator’s discretion, but only before the final distribution — and distributions can happen quickly in asset-light construction insolvencies.
What to include: Every invoice you are owed. Even disputed invoices should be included — you can note the dispute. Include retention amounts. Include materials supplied but not yet invoiced if you have a claim. Over-claiming and then agreeing to an adjusted figure is far better than under-claiming and missing money you were entitled to.
Step 2 — Check Your QBCC Retention Money Rights
This is where Queensland subcontractors have a significant advantage that many do not know about.
Under the Queensland Building and Construction Commission Act 1991 (Qld) and related regulations, retention money — the percentage withheld from subcontractor payments as security for performance — must be held by a licensed contractor in a separate trust account. This is called a retention trust.
If the builder complied with their QBCC retention trust obligations:
- Your retention money sits in a trust account that is not available to the general body of creditors
- The trust money is protected from the liquidator’s reach (it belongs to the beneficiaries of the trust, not to the insolvent company)
- You can apply to release your retention money from the trust even during the liquidation
If the builder did NOT comply (a common finding in construction insolvencies — builders who were already in financial difficulty often stopped maintaining their trust accounts):
- Your retention money may have been mixed with general operating funds
- You become an unsecured creditor for the retention amount
- There may be a claim against the QBCC’s Subcontractors’ Charges scheme or a breach of the QBCC Act that the liquidator or QBCC will investigate
Request the trust account records from the liquidator immediately. If retention money is confirmed held in trust, engage a lawyer to assist you in recovering it efficiently. If trust records are missing or the trust was not maintained, that is a separate legal issue that should be raised with the liquidator and potentially with the QBCC.
Step 3 — Verify Your PPSA Registration
The Personal Property Securities Act 2009 (Cth) (PPSA) allows suppliers of goods to register a security interest over those goods — even if they are already on a building site. If your PPSA registration is valid and properly perfected, you may be able to recover materials and equipment from the site rather than standing as an unsecured creditor for their value.
A valid PPSA registration means:
- You registered your security interest on the Personal Property Securities Register (PPSR) before the goods were delivered (or within the 15-business-day purchase money security interest window)
- The registration correctly identifies the collateral and the grantor
- The registration was not defective (e.g., wrong ABN, wrong description of goods)
If your PPSA registration is valid, you may have priority over the liquidator and secured creditors for the specific goods you supplied. This is a significant legal advantage — but it requires immediate action. The liquidator will be inventorying the company’s assets. You need to assert your PPSA rights before assets are sold.
If you did not register on the PPSR, or if your registration was defective, you lose the benefit of PPSA priority. This is one of the most common and most costly mistakes subcontractors make — registering late, or not at all, because they trusted the builder.
What About Subcontractors’ Charges?
Queensland has a specific mechanism called a subcontractor’s charge under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act). A subcontractor’s charge allows you to claim a charge over money owed to the head contractor under the head contract — in effect, you can redirect funds from the principal (the developer or property owner) to yourself, bypassing the insolvent head contractor.
To be effective, a subcontractor’s charge must be:
- Served on the principal before they pay the liquidated head contractor
- Served in the correct form within the required timeframe
- For an amount validly owed to you under your subcontract
Timing is everything. Once the principal has paid the head contractor (or the head contractor’s liquidator has received funds), the window to claim a charge over those funds closes. If you suspect a builder is in financial difficulty, a subcontractor’s charge can be served before formal liquidation — and you should consider this as soon as invoices go unpaid beyond their due date.
If the builder is already in liquidation, the subcontractor’s charge must be served on the principal as a matter of urgency. Even if construction has stopped, there may be funds held under the head contract that have not yet been released to the liquidator.
Priority in the Distribution Waterfall — Where Do You Sit?
In a Queensland construction liquidation, creditors are paid in the following order under section 556 of the Corporations Act:
- Liquidator’s costs and remuneration
- Costs of creditors who assisted in the liquidation
- Employee entitlements (wages, superannuation, leave)
- Secured creditors (up to the value of their security)
- Unsecured creditors (pro-rata)
- Shareholders (rarely)
Subcontractors are typically unsecured creditors unless they have a valid PPSA registration, a subcontractor’s charge, or can recover from the QBCC retention trust. This means you rank below employees and secured lenders — and in a construction insolvency where assets are few and liabilities are large, unsecured creditors often receive very little.
The tools described above — QBCC retention trust, PPSA registration, subcontractor’s charge — exist precisely to lift subcontractors out of the unsecured creditor pool. Whether you can use them depends on whether you have been legally protected before the collapse. But even if you have not, acting quickly can still make a difference.
What If There Are Retention Moneys in an Insolvency Pool?
The Federal Government has also established the Fair Entitlements Guarantee (FEG) scheme for employees — but this does not extend to subcontractors. Subcontractors are not employees and are not covered by FEG. There is no equivalent Commonwealth safety net for subcontractors, which is why the QBCC retention trust regime and the subcontractor’s charge are so important — they are your safety nets.
What to Do Right Now — A Practical Checklist
- ☑️ Confirm the liquidation: Search ASIC’s published insolvency notices (asic.gov.au/regulatory-resources/insolvency/) and identify the appointed liquidator.
- ☑️ Preserve all documentation: Signed subcontracts, all tax invoices, delivery records, variation approvals, site communications. Do not rely on the builder’s records — they may be incomplete.
- ☑️ Contact the liquidator: Register as a creditor and request the proof of debt form. Ask for information about any QBCC retention trust account.
- ☑️ Check the PPSR: Log in to the Personal Property Securities Register (ppsr.gov.au) and search for your PPSA registration against the company’s ABN. Confirm it is valid and not defective.
- ☑️ Assess your subcontractor’s charge: Are there funds still owed to the builder under the head contract? If yes, serve the charge on the principal immediately — do not delay.
- ☑️ Get legal advice: The steps above have legal and timing requirements. Getting one of them wrong can cost you priority you are entitled to. A lawyer experienced in construction insolvency can advise you within 24-48 hours of a builder’s collapse.
How Boss Lawyers Can Help
Boss Lawyers acts for subcontractors and creditors in Queensland construction insolvencies. We understand the QBCC regime, the PPSA priority rules, and the subcontractor’s charge process. We know the timelines and the mistakes that cost subcontractors money they should have recovered.
If you have been caught by a builder’s collapse, do not wait. Contact us on 1300 267 711 or visit our Building and Construction Lawyers page to find out how we can help you recover what you are owed.
We also act for creditors in all forms of Queensland insolvency proceedings — liquidations, voluntary administrations, and DOCAs — and for creditors pursuing debt recovery in Queensland.
Call us on 1300 267 711.
Frequently Asked Questions
What is a subcontractor’s charge in Queensland?
A subcontractor’s charge is a legal mechanism under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) that allows a subcontractor to claim a charge over money owed to the principal contractor (builder) under the head contract. It redirects funds from the project principal to the subcontractor, bypassing the insolvent builder. Timing is critical — the charge must be served before the relevant funds are paid to the builder or their liquidator.
Am I automatically entitled to my retention money if the builder goes into liquidation?
Not automatically. Retention money should be held in a separate QBCC trust account. If it was correctly held in trust, it is protected from the liquidator and can be released to you. If the builder did not maintain the trust (which is common in financially distressed builders), your retention money may have been mixed with general funds and you become an unsecured creditor for that amount. You should immediately contact the liquidator and request information about the retention trust.
How long do I have to lodge a proof of debt?
The liquidator will specify a proof of debt deadline in their initial circular to creditors. This is typically 20-30 days from the date of the circular but varies. Late proofs may be accepted before the final distribution, but distributions can occur quickly. Lodge your proof of debt as soon as possible after receiving the liquidator’s notice — do not wait.
What if I do not have a PPSA registration?
Without a valid PPSA registration, you are an unsecured creditor for the value of any goods you supplied that remain on site. The liquidator can deal with those goods as company assets. If you registered on time but the registration is defective, there may still be options — a lawyer experienced in PPSA disputes can assess whether the registration can be saved or whether an estoppel or other argument applies. If no registration exists at all, focus your energy on the proof of debt and any subcontractor’s charge.
Can I recover money from the builder’s directors personally?
Possibly. If the builder continued trading while insolvent, the directors may be personally liable for insolvent trading under section 588G of the Corporations Act 2001 (Cth). The liquidator investigates insolvent trading claims — if they pursue one successfully, the proceeds are distributed to unsecured creditors. You can also raise insolvent trading concerns with the liquidator and provide evidence. In some cases, individual creditors may have standing to pursue directors directly, but this is fact-specific and requires legal advice.
This article provides general information only and does not constitute legal advice. Laws and their application change over time. You should obtain specific legal advice relevant to your circumstances before taking any action.
