The Parliamentary Joint Committee on Corporations and Financial Services handed down its report on corporate insolvency in July 2023. Treasury published the Government response on 6 August 2026. Three years and one month separate the two documents, and the substance of the response is that almost nothing will be decided yet.
Of the 28 recommendations, 25 are supported in principle, two are simply noted, and one is supported outright. Not a single one is rejected. The one that carries full support, Recommendation 26, concerns the Whittaker Review, and the action described was already completed in September 2023 when the Government released its formal response accepting 345 of the 394 recommendations.
Across the remaining recommendations, 23 point to the same destination. That destination is the Productivity Commission inquiry into reducing barriers to business dynamism, an inquiry whose terms of reference were only set on 12 May 2026.
Why this lands on residential construction harder than most
Construction has been the largest single sector for corporate collapses in Australia for years, and more than 3,400 construction businesses entered external administration in 2025-26 according to ASIC data. The industry carries the highest count of any sector, which means the design of the insolvency system is not an abstract legal question for builders. It determines who gets paid, how quickly a viable business can be rescued, and whether a subcontractor owed money at the point of collapse sees any of it.
Four of the deferred recommendations sit directly on that machinery.
Who gets paid first
Recommendation 23 asked the review to examine the relative priority of employees, liquidators and secured creditors, including priority over circulating assets under section 561 of the Corporations Act 2001. The Committee specifically flagged this as a high priority topic. Subcontractors are unsecured creditors and sit behind employees, secured lenders and the practitioner conducting the administration. The Government supports the recommendation in principle and notes the Commission may consider it.
Trust structures in external administration
Recommendation 28 asked the Government to amend the Corporations Act to clarify the treatment of trusts with corporate trustees during insolvency. Trust structures are widespread across building businesses, and the law governing what happens when a corporate trustee fails is unsettled enough that outcomes can turn on the particular court. The Government response describes this as an important area of reform that would improve efficiency and outcomes for distressed companies, their creditors and the broader economy. It then defers timing and sequencing to the Commission process.
The rescue pathways builders actually use
Recommendation 8 covered the small business restructuring pathway and the simplified liquidation pathway. These are the mechanisms available to smaller builders trying to trade out of distress rather than close. The Government supports reform in principle and notes the Commission may consider them, though it also states it will consider whether any targeted changes could be progressed in parallel. That is the clearest opening in the entire document for near term movement.
Advisers who profit from distress
Recommendation 15 addressed the harm caused by untrustworthy advisers operating in the space before a formal insolvency appointment, and asked for prompt interim action on regulation and enforcement. The Government supports the recommendation in principle and notes the Commission may consider the matter alongside its review of sections 1, 3 and 4 of the Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020. Phoenixing is a documented problem in construction, where a company can fail owing trade creditors and a substantially similar operation can appear shortly afterwards.
Where it all goes now, and how long that takes
The Productivity Commission inquiry that everything has been handed to is at an early stage. Initial submissions closed on 3 July 2026. An interim report is scheduled for November 2026, with final submissions due in December and public hearings in February 2027. The final report is due to the Australian Government by May 2027.
Under the Productivity Commission Act 1998, the Government must table that report in each House of Parliament within 25 sitting days of receiving it. Tabling is not the same as responding. On the evidence of the document just published, a considered government response to a major inquiry can take three years. Drafting and passing legislation comes after that again.
The sequence, laid out plainly, means the settings builders operate under today are the settings that will still apply for the foreseeable term. That is an observation about the published timetable rather than a forecast about what any government will do.
What has already moved
The response is not entirely empty, and it is worth separating what has been done from what has been deferred.
- Four recommendations from the earlier Safe Harbour Review were implemented through the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024, passed on 4 July 2024. ASIC subsequently published an updated Regulatory Guide 217 on directors and insolvent trading on 6 December 2024.
- ASIC updated Regulatory Guide 258 on registered liquidator requirements on 3 October 2024, following law reform commencing in January 2021 that allows registration where the 4,000 hour experience requirement has not been met but the applicant is otherwise suitable.
- ASIC updated Regulatory Guide 16 on reporting of possible offences and misconduct by external administrators on 5 September 2024, and made changes to forms and processes during 2025 to reduce the reporting burden on registered liquidators.
- On the Fair Entitlements Guarantee, the Government states it is considering reforms to address potential misuse that could be implemented independently of the Commission inquiry, following public consultation in early 2025.
The Fair Entitlements Guarantee point carries a caveat that matters on site. The scheme covers employee entitlements where an employer becomes insolvent. It does not cover subcontractors, who are creditors rather than employees. Reform to that scheme improves outcomes for wage earners in a collapse and does not reach the subcontractor chain.
The construction specific case is being made elsewhere
Residential construction has not been treated as a distinct problem in the Government response, which addresses corporate insolvency generally. That framing is being challenged in the Commission process itself. A submission to the inquiry from Queensland University of Technology researchers Amanda Bull, Morgan O’Neill, Lyndall Bryant and Elizabeth Streten, drawing on Building 4.0 CRC Project 80, argues that the business dynamism problem in residential construction is not principally about firms entering or exiting the market. Their argument is that regulatory, contractual and insolvency settings make it disproportionately hard to run, grow and where necessary rescue an otherwise viable residential building business.
That distinction matters. A general insolvency framework designed around companies with balance sheets and stable revenue behaves differently when applied to a business whose cash flow arrives in stages, whose liabilities are fixed by contract years in advance, and whose collapse strands homeowners and trade creditors simultaneously. Whether the Commission adopts that framing will shape how useful its recommendations are to the sector that generates the most insolvencies.
The practical picture
For a building business, the operative fact is that the rules did not change on 6 August 2026 and are not scheduled to change soon. Safe harbour operates as it has since the 2024 amendments. Small business restructuring operates on its existing thresholds. Section 561 priority is unaltered. The position of a corporate trustee in external administration remains as unsettled as it was. Nothing in the response alters the risk profile of a job that goes wrong, and nothing in it improves the position of a subcontractor owed money by a head contractor that fails.
What the response does establish is a fixed set of dates for anyone tracking the reform pipeline. November 2026 for the interim report, February 2027 for hearings, May 2027 for the final report. Those are the points at which the picture could genuinely change, and the interim report in particular will indicate whether the Commission has engaged with construction as a distinct case or folded it into a general treatment of business exit.
Frequently asked questions
The Government supported 25 of the 28 recommendations in principle, noted two, and supported one outright. It rejected none. In 23 of the responses it stated that the Productivity Commission may consider the matter as part of its inquiry into reducing barriers to business dynamism, which effectively defers substantive decisions until that inquiry concludes.
The Commission will release an interim report in November 2026, hold public hearings in February 2027, and provide its final report to the Australian Government by May 2027. Under the Productivity Commission Act 1998 the Government must then table the report within 25 sitting days, after which it may respond and, if it chooses, legislate.
Four stand out. Recommendation 23 on creditor priority under section 561 of the Corporations Act determines who is paid when a company fails. Recommendation 28 on trusts with corporate trustees affects a structure common in building businesses. Recommendation 8 covers the small business restructuring and simplified liquidation pathways. Recommendation 15 concerns advisers operating in the period before a formal appointment and the enforcement of phoenixing law. All four were supported in principle and referred onward.
Some changes predate this response. Four Safe Harbour Review recommendations were enacted through legislation passed on 4 July 2024. ASIC updated its regulatory guidance on insolvent trading in December 2024, on registered liquidators in October 2024, and on external administrator reporting in September 2024, and adjusted its forms and processes during 2025. The Government also states it is considering Fair Entitlements Guarantee reforms independently of the Commission inquiry.
No. Subcontractors are generally unsecured creditors and rank behind secured creditors, employee entitlements and the costs of the external administration. The Committee recommended that this priority arrangement be examined as a high priority topic. The Government supported that in principle and referred it to the Productivity Commission, so the current ranking is unchanged.
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- COVID Did Not Break Australian Construction. But It Left the Industry Exposed.
This article contains general information only. It does not take account of the objectives, financial situation or needs of any particular business and is not a substitute for professional advice.
Last updated: August 2026
Sources: Australian Government response to the Parliamentary Joint Committee on Corporations and Financial Services report, Corporate insolvency in Australia (Treasury, August 2026); Productivity Commission, Reducing barriers to business dynamism inquiry page; Productivity Commission Act 1998; ASIC insolvency statistics; QUT ePrints record 266322.
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