Building and Construction Update: October 2026

This month, the Bathla Group administration has moved into a more difficult phase, while Victoria’s new Minimum Financial Requirements continue to reshape how domestic builders need to think about capacity and growth.

We also look at the role of SMSF auditors when property investments become distressed.

Bathla funding runs out as administration shifts focus

The Bathla Group administration has entered a more difficult phase.

Administrators Teneo secured $4.7 million in short-term funding earlier in September. That funding has now been exhausted.

Broader discussions with lenders about longer-term support have also concluded without a group-wide solution. At time of writing construction work has been halted across a number of sites, although individual lenders may still agree to fund particular projects. Staffing has also been cut significantly.

The focus is increasingly moving toward individual projects, asset preservation, sales and creditor recoveries.

The financial position remains complex.

Bathla has about $3.4 billion in currently known consolidated creditor claims. Around $3.08 billion is claimed by secured lenders.

Administrators are also working through significant accounting issues. The ABC has reported that Bathla’s records may contain about $736 million in overstated inter-company receivables and payables, subject to reconciliation.

The NSW Supreme Court has extended the period before the second creditors’ meeting until 13 September 2027. Administrators can convene the meeting earlier if circumstances allow. The extension gives them more time to work through unfinished projects, funding arrangements and the group’s broader financial position.

The Bathla collapse has also become part of ASIC’s broader focus on private credit.

ASIC has pointed to recent private credit failures as evidence of why governance, oversight, disclosure and valuations matter. It has also warned that tighter liquidity and borrower stress are putting more pressure on loan valuations and fund practices.

For developers, lenders and investors, the Bathla administration is another reminder of how quickly project finance can fragment once a major developer loses access to central funding.

Builders: what does an MFR agreement actually mean for you?

Victoria’s new Minimum Financial Requirements are about demonstrating that your business has the financial capacity to support the amount of domestic building work you want to undertake.

From 1 July 2026, registered domestic builders must operate within an approved Maximum Construction Capacity.

For most builders with capacity of up to $20 million, adjusted net tangible assets must generally equal at least 5% of that approved capacity, unless the BPC determines otherwise.

If you want to increase your capacity but do not currently meet the financial requirements, the BPC may work with you on a pathway to address the shortfall, which could include a financial recovery plan or other conditions, which are intended to be dealt with an ‘MFR Agreement’. However, the BPC is yet to publish the MFR Agreement or provide detailed guidance around what the MFR Agreement should include.

Assuming a MFR Agreement can be prepared that meets the BPC’s as-yet unknown requirements, that agreement can create a pathway toward compliance.

It may involve:

• injecting additional capital
• reducing work in progress
• providing a guarantee
• meeting agreed financial milestones
• providing ongoing financial reporting.

The important point is that an MFR Agreement is not simply a paperwork exercise.

Your financial position can directly affect how much work you are allowed to take on.

Builders must also apply to increase their Maximum Construction Capacity before entering into work that would cause, or is likely to cause, them to exceed their approved limit.

If your numbers are tight, or you are planning a significant increase in turnover, it is worth understanding your position early.

Waiting until the pipeline is already committed can leave you with fewer options.

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What is the SMSF auditor’s role when a property investment starts to go bad?

A distressed property investment can quickly become more than an investment problem.

For an SMSF auditor, one of the central questions is whether there is sufficient evidence to support what appears in the fund’s financial statements.

That becomes more difficult when an investment is illiquid, a development has stalled or a scheme is under financial pressure.

Key questions may include:

• Is the investment still worth what the fund says it is?
• Is there objective evidence supporting that valuation?
• Can ownership of the investment be established?
• Are there related-party, in-house asset or arm’s-length issues?
• Is there enough reliable evidence for the auditor to sign off on the accounts?

The auditor is not there to decide whether the original investment was a good commercial decision.

But the auditor does need sufficient appropriate evidence about matters such as ownership, valuation and compliance.

The ATO’s SMSF auditor checklist specifically identifies ownership, market value and supporting documentation as areas auditors need to verify. It also requires valuations to be based on objective and supportable evidence.

The ATO has also made clear that auditors must obtain evidence supporting the market value of fund assets. If the evidence does not support the valuation, the auditor may need to modify the audit opinion and consider lodging an auditor contravention report.

ASIC has previously taken action against SMSF auditors who failed to obtain sufficient audit evidence about matters including asset ownership, valuations, related-party transactions and arm’s-length requirements.

So when a property scheme becomes distressed, the annual SMSF audit can be one of the first points where uncertainty around value, ownership or recoverability becomes impossible to ignore.

The contents of this update do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such. They are designed and intended as general information in summary form, current at publication, for general informational purposes only. You should seek legal or other professional advice concerning any particular legal matters you or your organisation may have.

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