If you are reading this because your builder has just gone into liquidation, or because you think they are heading that way, the situation is serious but it is also well understood. There is an established process, there is usually insurance behind it, and thousands of Australian homeowners have worked through it before you.
This guide covers both halves of the problem. The first half is what to do when it has already happened: what liquidation means for your contract, what happens to the money you have paid, and the specific steps to take in the first fortnight. The second half is prevention, which matters whether you are about to sign a contract or you are reading this to make sure it does not happen again on the next project.
Nothing here is legal advice. The right answer depends on your state, your contract and how far through the build you are, and this guide is written to help you ask the right questions of the people who can advise on your specific position. For the wider sequence a residential build follows, the BUILTLY complete guide to building a house in Australia sets out where this risk sits against every other stage.
Warning signs before liquidation
Builders rarely collapse without notice. In most cases the signs are visible on site for weeks or months before anything formal happens, and homeowners who recognise them early have more options than those who find out from a liquidator's letter. None of these signals proves a company is insolvent on its own. A pattern of several at once is what matters.
- Site activity slows or stops without an explanation that holds up. Weather and material delays are real, but they can be described specifically. Vague repeated delays are the concern.
- Subcontractors tell you they have not been paid, or you notice trades leaving the job and not returning. Subcontractors usually know a builder is in trouble well before the client does.
- Requests for payment ahead of the schedule, for money outside the contract, or for a payment described as needed to keep materials coming.
- Suppliers put the job on credit hold, or materials arrive in small quantities as they are paid for rather than in normal deliveries.
- Communication deteriorates. Calls go unanswered, the site supervisor changes repeatedly, or the office staff you dealt with have left.
- Progress claims are issued for work that has not been done, or the claimed percentage complete no longer matches what you can see on site.
There are also checks you can run yourself without engaging anyone. The national company register maintained by ASIC lists the company status, the directors and whether an external administrator has been appointed, and a company search is inexpensive. Your state building regulator publishes licence status, and in Queensland the QBCC also publishes a licensee's financial category, which indicates the maximum annual turnover the licence permits - the BUILTLY guide on the QBCC licence check explains how to run that search and read the category. A builder whose licence has been suspended, downgraded or made subject to conditions is worth asking about directly.
Court and default listings are the other useful source. Statutory demands, wind-up applications and payment disputes brought under security of payment legislation are matters of public record in most states. A single dispute means little in an industry that runs on contested claims. A cluster of recent ones is a different signal.
If you see the pattern
Do not accelerate payments to help a struggling builder finish. It is a natural instinct and it is the single most expensive mistake homeowners make in this situation. Paying ahead of completed work moves your money out of the contract and into the general pool of company funds, where it is available to every creditor rather than to your build. Keep payments matched to work genuinely completed and get advice early.
What happens if your builder goes into liquidation
Liquidation is the formal winding up of a company. An independent liquidator is appointed, control of the company passes to them, and their job is to realise whatever assets exist and distribute the proceeds to creditors in the order the law sets. Voluntary administration is a related but different process, where an administrator is appointed to see whether the business can be saved. Administration sometimes ends in a return to solvent trading. In residential building it more often ends in liquidation.
Liquidation only applies to companies. If your builder is a sole trader, meaning the licence and the contract are in a person's own name with an ABN but no ACN, the equivalent process is personal bankruptcy under the Bankruptcy Act 1966, with a trustee in bankruptcy rather than a liquidator. The practical steps are similar but the ending is not, because the person still exists after discharge while a liquidated company is deregistered. That scenario is covered in what happens if your builder goes bankrupt in Australia, which also explains how to confirm which structure your builder uses.
For your contract, the practical effect is that the company can no longer perform it. Most residential building contracts include a clause allowing termination on insolvency, but the right to terminate is not the same as the right to walk away cleanly, and terminating at the wrong moment or in the wrong form can affect your insurance claim. This is the first point where advice specific to your contract and state is worth paying for.
What happens to money already paid
Money you have already paid the builder is gone from your control. It is not held in trust for your project, it is company money, and it sits with everything else the liquidator gathers. As an ordinary unsecured creditor you rank behind secured lenders and employee entitlements, and in most residential builder liquidations unsecured creditors recover little or nothing.
This is why the gap between what you have paid and what has actually been built is the number that matters most. If your payments have tracked the work, the loss is limited to the cost of a new builder taking over a part-finished job, which is real but manageable. If you are a full stage ahead, that difference is exposed. The BUILTLY guide on the progress payment schedule explains how the stages are meant to line up with completed work, and it is the clearest way to work out where you actually stand.
Who you will be dealing with
You will typically deal with three parties at once. The liquidator handles the company, and will write to you as a creditor with details of the appointment and the claim process. Your state insurer or scheme handles the domestic building insurance claim. Your lender needs to be told, because construction loans draw down against progress stages and those stages have now stopped.
Realistic timing matters for planning. Expect several weeks before the liquidator confirms the position on your contract and releases the site, then a further period for the insurer to assess a claim, appoint an assessor and inspect the work. Most homeowners are three to nine months from the liquidation date to a new builder starting. Budget for holding costs across that period, including rent, loan interest and site security.
Your immediate next steps
The first two weeks set up everything that follows. The aim is straightforward: stop losing money, protect the asset, and build a complete record of where the project stood on the day the builder failed.
Stop making payments
Stop all payments immediately, including any scheduled direct debit or bank authority, and tell your lender to hold further progress draws. Do not pay a claim already issued, do not pay a site supervisor or director directly, and do not pay a subcontractor for work the builder was contracted to deliver until you have advice. Once an external administrator is appointed, payments made to the wrong party are usually not credited against the debt, which means paying twice.
Secure the site
A stalled site deteriorates quickly and the deterioration is usually not covered by anyone. Make sure temporary fencing is standing and locked, exposed framing and openings are protected from weather, and any unsealed slab or excavation is drained. If site power, water or waste services were in the builder's name, arrange for them to continue. Take control of keys and access, and confirm with your insurer or broker who carries the risk on the incomplete structure now that the builder's cover may have lapsed. The BUILTLY guide on construction insurance in Australia sets out which policies cover works under construction and who is normally named on them.
Contact your state insurance scheme
Contact the domestic building insurance scheme for your state early, even if you are not ready to lodge. Every state runs a version of this cover under a different name, and each has its own trigger, time limit and claim cap. The BUILTLY guide on home warranty insurance in Australia sets out the scheme in each state, what it covers and what the limits are. Find your certificate of insurance now, because you will need the policy number, the insured amount and the named builder for the claim.
Record the current state of the build
Record everything before anything changes on site. Photograph and video every room, elevation, service rough-in and open cavity, with dates. Note what is complete, what is partially complete and what is defective. Collect the contract, every variation, every progress claim and every payment receipt into a single dated file, and reconcile total paid against work completed so you can state the position in one line.
An independent building consultant or quantity surveyor report at this point is worth the fee. A costed assessment of completion percentage and defects is the document your insurer, your lender and your next builder will all rely on, and it is far harder to produce once remedial work has started.
Get advice before engaging anyone new
Do not sign a new builder before your claim position is clear. Some schemes require the insurer to approve the completion contractor or the scope, and engaging someone independently can reduce or void what you recover. Speak to a construction solicitor about termination and to your insurer about sequence, then run the replacement contract through the same discipline as the first one. The BUILTLY guide on building contract review in Australia covers what an independent review checks for, and a completion contract carries more risk than an original build because the new builder inherits someone else's work.
Making a home warranty insurance claim
Insolvency is one of the defined triggers these schemes exist for, so a liquidation claim is usually more straightforward than an incomplete or defective work claim against a solvent builder. The practical sequence, rather than the policy detail, is what most homeowners need at this point.
The claim generally proceeds in a set order. You confirm the policy exists and covers your contract. You notify the insurer of the insolvency and lodge within the scheme time limit, which is commonly measured in months from the date you became aware, not from when the work stopped. The insurer appoints an assessor who inspects the site and forms a view on the percentage complete and the defects present. The insurer then determines the cost to complete and rectify, applies the policy limit and any excess, and either funds the works or approves you to procure them.
Several points decide how well a liquidation claim goes.
- Lodge early and in writing. Time limits are strict and the assessment queue is long, so a delayed notification costs months even when the claim is otherwise sound.
- Understand your state trigger. Some schemes respond only on a last resort basis, which means the claim cannot be paid until the insolvency is formally established rather than merely obvious.
- Claim non-completion and defects together. Work already built badly by the failed builder is normally claimable alongside the cost to finish, within the one policy limit.
- Expect the limit to bind. Scheme caps are set per dwelling and per contract, and on larger or higher specification builds the cap can sit well below the true cost to complete.
- Keep every cost you incur. Site security, weather protection, consultant reports and holding costs are sometimes recoverable and are always relevant evidence.
Two gaps catch people out. The first is a policy that was never issued, which happens when a builder collects the premium and does not take out the cover, and it is why the certificate should be confirmed before the deposit is paid. The second is the difference between what the insurer will pay and what the completion actually costs, because the replacement builder is pricing a part-finished job with unknown work behind the linings. Statutory warranties on the original work also cease to be enforceable once the company is deregistered, and the BUILTLY guide on builder warranties in Australia explains what those entitlements would have covered.
Protecting yourself before you sign
Solvent, competent companies do occasionally fail, so no amount of checking removes this risk entirely. What checking does is remove the avoidable version of it, and it limits the damage if the unavoidable version happens. Four things do most of the work.
Check the licence and its financial category
Confirm the licence is current, held by the exact entity named on your contract, and classed for work of your type and value. In Queensland the QBCC licence also carries a financial category tied to permitted annual turnover, which is a rare public signal of capacity: a builder taking on work well beyond their category is a genuine risk indicator. The BUILTLY guide on how to check a builder licence in Australia sets out the register to use in each state and what the results mean.
Check the company and its directors
Search the company on the national register maintained by ASIC and check the registration date, the status and the directors. Then search those directors' names. A pattern of previous companies placed into liquidation, with a new entity trading under a similar name, is the single most useful thing you can find before signing. Contracting with a company registered weeks earlier while an older entity of the same name has been wound up deserves a direct explanation.
Keep payments behind the work
Structure progress payments so each stage is claimable only once the work in that stage is genuinely finished, and inspect before you release funds. Deposits are capped by legislation in most states, and a request for a large upfront sum, a discount for paying a stage early or payment for materials not yet delivered to site should all be declined. If a builder cannot fund the next stage without money for work not yet done, that is information about the company's position, not a favour you are being asked for. Homeowners funding a build on a minimal deposit carry the most exposure here, because there is little contingency left to complete the work if the builder fails mid-build, as the BUILTLY guide on building on a 5% deposit sets out.
Confirm the insurance certificate before you pay
Ask for the certificate of insurance in your name for your contract, and check the insured amount matches the contract price, before the deposit leaves your account. Verify the certificate with the scheme rather than accepting a copy at face value. This one step is what converts a liquidation from a total loss into a covered claim, and it takes a phone call.
These four checks are the insolvency-specific part of a wider pre-contract process covering licensing, insurance, complaint history, past projects and references. The BUILTLY guide on how to vet a builder in Australia sets out that full sequence with a checklist you can work through before signing. For the financial assessment specifically, carried out before a contract is signed rather than after a builder has failed, see how to assess a builder's financial health before you sign.
BUILTLY and lasting project records
Every check in the prevention section has the same weakness. Licence registers show current status but not delivered work, company searches show entities but not sites, and a builder's own marketing shows selected photographs without a durable link to the projects behind them. When a company is wound up and a new one starts trading, that history is easy to lose.
BUILTLY is building a record of completed Australian homes that credits the builder, architects, designers and trades behind each one.
That is the point of the record. Verified licence status and a published history of completed work will not prevent every failure, but together they answer the question this guide exists for well before it becomes urgent. Publishing the record ahead of time is a great deal easier than reconstructing it after a liquidator has been appointed.
Frequently asked questions
Do I still owe the builder money if they go into liquidation?
Any amount properly claimed and payable before the liquidation date remains a debt, and the liquidator may pursue it as an asset of the company. What you should not do is keep paying on the old schedule or pay a claim that covers work not yet completed. Once a liquidator is appointed, payments go to the liquidator rather than to the site office or a director, and paying the wrong party can leave you paying twice. Get written confirmation of who is entitled to receive funds before you release anything, and hold the balance of your finance until your insurer and your adviser have looked at the position.
How long does it take before I can start work again with a new builder?
Most homeowners in this position are looking at somewhere between three and nine months from the liquidation date to a new builder starting on site. The variables are how quickly the liquidator releases the site and the contract position, how long your state insurer takes to assess the claim, how long the scope and defect inspection takes and how long it takes to price the remaining work. Sites in states where the insurance operates on a last resort basis usually take longer, because the claim cannot be assessed until the insolvency is formally confirmed.
Is my deposit protected if the builder never starts?
In most states the domestic building insurance scheme covers non-completion, including a deposit paid where no work has started, subject to the scheme limits and the requirement that the policy was actually taken out for your contract. This is the reason to confirm the certificate of insurance exists in your name before you pay a deposit rather than afterwards. If no policy was ever issued, the deposit becomes an unsecured claim in the liquidation and recovery is usually poor.
Can I use the subcontractors who were already on the job?
Often yes, and it can be practical because they know the build. Engage them directly under new written agreements rather than assuming the old arrangements carry over, confirm their own licences and insurances, and check with your insurer first, because some schemes require the rectification and completion works to be carried out under a single head contract for the claim to be paid. Also be aware that subcontractors owed money by the failed builder have no right to be paid twice by you for the same work.
What happens to the warranty on work the failed builder completed?
The statutory warranties attach to the company that carried out the work, so when that company is deregistered there is no solvent entity to enforce them against. That is exactly the gap the domestic building insurance scheme is designed to fill, and defective work by the failed builder is usually claimable alongside non-completion within the same policy limit. The BUILTLY guide on builder warranties sets out what those entitlements cover in normal circumstances so you can see what is being replaced by the insurance response.
Would checking the builder more carefully have prevented this?
Not always, because solvent companies do fail, and no public check predicts a collapse with certainty. What careful checking does is remove the avoidable cases: the unlicensed operator, the builder whose licence class does not cover the value of your job, the director with a history of failed companies and the payment structure that leaves you far ahead of the work. Those checks take a few hours before you sign and they are the difference between bad luck and a foreseeable loss.