Subcontractor statement

In NSW, a principal contractor can be held responsible for some of its subcontractors' unpaid obligations. The subcontractor statement is the shield. It is made for the purposes of three laws:

• Workers Compensation Act 1987 (NSW), section 175B. The principal contractor can be liable for a subcontractor's unpaid workers compensation premiums unless it holds a statement for that period.

• Payroll Tax Act 2007 (NSW), Schedule 2 Part 5. The principal contractor can be liable for a subcontractor's unpaid payroll tax relating to the contract.

• Industrial Relations Act 1996 (NSW), section 127. The principal contractor can be liable for unpaid wages owed to the subcontractor's employees for work under the contract.

If the principal contractor holds a statement for the period and has no reason to believe it is false, it is generally not liable for those amounts.

The statement covers a specific period, usually the period of the progress claim it accompanies. The subcontractor completes the form, signs it, and attaches a current workers compensation certificate of currency where required. Many head contractors require a fresh statement with every progress claim and will not pay until it is received.

The form records the subcontractor's details, the principal contractor, the contract, the period covered and declarations that workers compensation insurance was held, wages were paid and payroll tax obligations were met. The principal contractor must keep the statement for the period the legislation requires.

A subcontractor who knowingly gives a false statement commits an offence. A principal contractor who has reason to believe a statement is false loses the protection.

Head contractors usually manage this through their subcontractor compliance process, alongside insurance certificates, licences and induction records. Statements are checked when each claim comes in, and missing or incomplete statements are flagged before the payment run rather than after.

A certificate of currency is issued by an insurer and proves a workers compensation policy exists for a period. It says nothing about wages or payroll tax.

A subcontractor statement is a declaration by the subcontractor covering all three obligations. The two work together: the statement is the declaration and the certificate is evidence that the insurance part is true. Other states have different arrangements, so a NSW form is not the answer interstate.

• Accepting a statement for the wrong period. The dates must match the claim or payment period.

• Out-of-date forms. Use the current form, which cites the Payroll Tax Act 2007, not the repealed 1971 Act.

• Unsigned or incomplete forms. A statement missing the signature or ABN may not give protection.

• Ignoring red flags. If workers on site say they have not been paid, the principal contractor cannot simply rely on the paperwork.

Forgetting lower tiers. A subcontractor who engages its own subcontractors should also be collecting statements from them for the same period.