Statistics released by AFSA on the occupations of personal insolvencies by employment industry released in August 2026 show that the largest industry where people entered personal insolvency was “Construction”.
Trades licensing in South Australia
In South Australia licensing of building work contractors is governed by the Building Work Contractors Act 1995 and licensing of plumbing contractors, gas fitting contractors and electrical contractors is governed by the Plumbers, Gas Fitters and Electricians Act 1995.
The common scheme put in place by this state legislation includes the following key provisions:
A person must not carry on business as a contractor except as authorised by a licence granted under the licensing legislation at the risk of being charged and, if convicted, having to pay fines of a maximum of $100,000 for a first or second offence and $150,000 or potentially being imprisoned for a third or subsequent offence.
A person is only entitled to be granted a licence if, along with other criteria, the person is not an insolvent under administration within the meaning of the Corporations Act (and in the case of building work contractors, has not been during the period of two years preceding the application an insolvent under administration or subject to a composition or deed or scheme of arrangement with or for the benefit of creditors), or if the person was a director of a body corporate wound up within five years preceding the application (or in the 6 months preceding the winding up).
It is cause for disciplinary action to be brought against a contractor if events have occurred such that the contractor would not be entitled to be licensed as a contractor, if the contractor were to apply for a licence.
“Insolvent under administration” is defined in the Corporations Act as including an undischarged bankrupt and also a person whose property is subject to control under section 50 or Division 2 of Part X of the Bankruptcy Act or who has executed a personal insolvency agreement under Part X of the Bankruptcy Act.
Importantly, “winding up” refers only to liquidation, and does not include the appointment of administrators, receivers or small business restructuring (SBR). In other jurisdictions, eligibility may be affected by any form of “external administration”.
In some circumstances, a license held by a company where the director holds a supervisor’s certificate can continue to use that license and trade even if the company is placed into voluntary administration and a deed of company arrangement is approved by the company’s creditors.
It is also worth noting that while some forms of external administration may not result in a loss of licence here in South Australia, certain types of administration may put the contractor’s building indemnity insurance at risk.
Approaches to disciplinary proceeding
Following the introduction of technology, the Small Business Commissioner can reconcile critical data and information pertaining to license holders and insolvency. Consequently, the initiation of disciplinary proceedings by the Commissioner for Consumer Affairs upon a person holding a licence becoming an insolvent under administration may be virtually automatic.
There are, however, at least two courses available to a person who finds his or her licence is at risk as a consequence of becoming an insolvent under administration.
First, it is possible to make submissions to the Commissioner for Consumer Affairs requesting that the Commissioner decline to bring disciplinary proceedings in the exercise of the Commissioner’s discretion. This may be appropriate, and potentially effective, where there is, for example, an appeal against the making of a sequestration order or an application for an annulment on foot which on its face has merit.
A second alternative, once disciplinary proceedings have been commenced in the District Court, is for the debtor to argue that a result other than disqualification is appropriate based on the facts of the case. The Court under both pieces of legislation may issue a reprimand, impose a fine, impose or vary licence conditions or place a time limit upon disqualification, rather than simply disqualify a contractor. The arguments available to a debtor as to penalty, of course, will depend on the individual circumstances of the debtor’s case.
Conclusion
Without taking action to ensure his or her licence remains current a person who previously depended on a licence for his or her livelihood before becoming insolvent will place himself or herself at risk of prosecution, a serious fine and, for a third or subsequent offence, imprisonment. Acting early if insolvency is imminent may minimise this risk.
Clarifying whether the license is held by an individual or by a body corporate is critical. Some trades in this position have not turned their mind to this for some time and may be operating under a misapprehension which can result in missed opportunities to restructure and avoiding serious consequences.
Cowell Clarke has significant experience in acting for debtors faced with the twin prospects of becoming an insolvent under administration and having a trades licence placed at risk. If you have any queries about this or any other bankruptcy topic please do not hesitate to contact Digby Luckhurst-Smith, Peter Leech or Amanda Brady.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.