Mackay Chapman May Building & Construction Update

Welcome back to our monthly building and construction update. 

This month, our focus turns to the growing pressure facing Victorian builders as project costs, insolvency risk and regulatory burdens continue to intensify across the sector.

Many Victorian operators are facing rising fuel costs, shrinking margins and increasing difficulty maintaining profitability under fixed-price contracts. At the same time, builders are navigating ongoing DBI eligibility requirements, capital pressures and operational restrictions that can significantly impact future growth.

Strategic planning and early regulatory engagement remain critical for Victorian construction businesses looking to protect stability and preserve scalability in 2026.

New DBI Eligibility Toolkit now available

Mackay Chapman has recently launched a free Domestic Building Insurance (DBI) Eligibility Toolkit designed to help Victorian builders better understand the application process, common risk areas and issues that can impact eligibility outcomes.

The toolkit includes practical guidance on key financial, operational and compliance considerations builders should be aware of before lodging an application. It also covers many of the common pitfalls that can delay approvals, trigger restrictive conditions or impact a builder’s ability to scale.

Access the free toolkit here.

Update to Domestic Building Reforms

The Victorian Government’s domestic building reforms are accelerating towards the Government’s self‑imposed 1 July 2026 deadline.

There has been some positive development for builders, and other developments that significantly increase regulatory risk, as outlined in recent briefings by the BPC to stakeholders.

On Minimum Financial Requirements (MFRs), the Government appears to have stepped back from the original, hard‑edged proposal. A revised framework still being worked on is expected to remove strict revenue caps, align more closely with existing DBI eligibility assessments and reduce the additional reporting burden, with transitional arrangements and no immediate change for builders who already hold a valid Letter of Eligibility. For many otherwise viable builders who were facing the prospect of strict revenue caps and duplicated financial tests, this will come as a relief – although the detail will matter, and we would expect some businesses to be uncomfortably close to the new thresholds.

At the same time as these final changes are being ironed out, the Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026 has now been introduced, and the Building and Plumbing Administration and Enforcement Act 2026 (Vic) has passed, both without any material changes. These give the BPC materially broader powers than what it has currently, and significantly increase both corporate and personal risk exposure for builders and directors.

Moreover, they underpin the move to a first‑resort DBI model, which is coming from 1 July 2026 whether the construction industry is ready or not, and notwithstanding the transitional provisions now being mooted by the Government. The new legislation strengthens the BPC’s administration and enforcement toolkit to include expanded information‑gathering powers, more flexible conditions that can be applied to registration and DBI eligibility, and a wider range of sanctions.

In practice, we expect to see more frequent early‑stage regulatory intervention from the BPC – for example, off the back of tax issues, related‑entity insolvencies, claims patterns, or perceived governance weaknesses – and for those interventions will have significant consequences if not addressed promptly and strategically.

Overall, from a regulatory risk perspective, the “good news” on a revised MFR design does not offset the reality that the new regime will be more interventionist than the current one, and less forgiving of gaps in financial, governance or eligibility settings.

Builders who are already close to DBI limits, carrying historical issues in director or group structures, or operating with marginal financial buffers should be using the current window to put in place a plan for dealing with reviews and limiting enforcement action before the new first-resort DBI framework kicks in.

Expect more developments in this space as the 30 June deadline draws nearer.

DBI approved, but with conditions?

Obtaining DBI approval is not always the end of the process.

Conditions attached to DBI eligibility can create significant operational limitations for Victorian builders, particularly where they impact turnover capacity, reporting obligations or ongoing financial monitoring requirements.

We see it all the time. Restrictive conditions can affect cashflow, project pipeline planning and a builder’s ability to take on larger work or scale operations confidently.

But it’s important to remember, conditions are not always fixed or beyond challenge. Where obligations are unclear, commercially restrictive or disproportionate to the actual risk profile of the business, there may be scope to review, negotiate or seek amendments.

We continue to assist Victorian builders with:

• negotiating removal of restrictive DBI conditions
• responding to insurer concerns and compliance issues
• preparing strategic submissions supporting increased eligibility limits
• managing DBI-related disputes and regulatory issues

Protecting DBI eligibility is often critical to protecting long-term business growth. Contact us today for assistance. 

Industry pressure continues to build across Victoria

Recent reporting and industry commentary continue to highlight the strain facing Victoria’s construction sector.

Builders and subcontractors are reporting escalating fuel, insurance, labour and material costs, while many remain locked into fixed-price contracts signed before recent cost increases. A recent Master Builders Victoria survey found almost half of respondents experienced project cost increases of between 6 and 10 per cent, while one in five reported cost blowouts exceeding 11 per cent.

Industry groups keep warning that these pressures are contributing to staffing reductions, project delays and increasing financial distress across the sector. 

There are also growing concerns that ongoing cost pressures and regulatory complexity may impact Victoria’s ability to meet housing supply targets in coming years.

Construction businesses operating in Victoria are in an environment where risk management, compliance positioning and strategic planning are central to long-term sustainability.

Here to support Victorian builders facing complex regulatory environments

Mackay Chapman continues to advise Victorian builders, developers and construction industry participants across a broad range of DBI, regulatory, insolvency and commercial matters.

Our recent work includes assisting builders with DBI limit increases, removal of restrictive conditions, business acquisitions involving DBI transfer considerations, recovery actions and broader construction-related disputes.

If your business is navigating DBI eligibility issues, facing operational restrictions, considering growth opportunities or managing financial and regulatory pressure, we encourage you to seek advice early.

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The contents of this update and its linked articles 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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