Most established builders and construction companies in NSW trade through a Pty Ltd company, often with a discretionary trust holding the shares and with plant, equipment or property held in a separate entity. The construction-specific factor is that your contractor licence and your Home Building Compensation Fund eligibility both attach to the trading entity, so that entity’s balance sheet has to stay strong enough to support the work you want to win. That constraint usually rules out the profit stripping approach that works in other industries.
Why a Builder’s Structure Is Driven by Licensing and Insurance
The licence follows the entity, not the person behind it. If you contract through a company, the contractor licence has to be in that company’s name with a nominated supervisor holding the relevant certificate. Moving the business into a new entity later means applying for a new licence rather than transferring the old one, which is why builders pay for structure changes twice as often as they should.
Home warranty eligibility is the constraint most builders underestimate. Eligibility under the Home Building Compensation Fund is assessed on the trading entity’s financial position, including net tangible assets and working capital, and those figures set the job value and turnover limits you can work within. Distributing every dollar of profit out to a trust each year weakens exactly the balance sheet the insurer is testing, so retention policy and structure have to be decided together.
Asset protection still matters, because the exposure runs for years after handover. Statutory warranty obligations under the Home Building Act sit with the contracting entity long after the job is finished, so plant, vehicles, property and personal assets are generally better held outside it. A company is not a complete shield though. Directors routinely give personal guarantees to suppliers, and the licence sits with named individuals.
How you engage your trades shapes the structure too. The entity that contracts subcontractors carries the payroll tax exposure under the NSW relevant contract provisions, along with the taxable payments reporting obligation and any superannuation questions where a subbie is engaged mainly for their labour. Splitting labour hire into a separate entity is sometimes proposed as a fix, and it needs to be tested carefully rather than assumed to work.
Two things that dominate structure conversations in other industries matter less here. Personal services income rules rarely bite on a builder, because producing a result, supplying your own tools and carrying liability for defects usually satisfies the results test. And on exit, the value in a construction business tends to sit in plant, contracts and relationships rather than transferable goodwill, so the structure question is more about protecting the trading entity than positioning it for sale.
Setting Up or Reviewing a Building Company?
If you are incorporating, adding entities, or working with a structure that no longer suits the size of the jobs you are taking on, our accounting for construction companies page sets out how we work with builders. You can read more about the firm at MYC Partners Accountants, or get in touch to talk it through with Kylie before the next licence or insurance renewal.