The changes were proposed as part of a Turnbull government review of building industry security of payment laws that produced 86 recommendations.

Report author John Murray said the key recommendation was the introduction of statutory trusts to stamp out "phoenixing" and ensure subcontractors are paid.

Like trust accounts of real estate agents and lawyers, it would secure the payments head contractors receive from clients, ensuring payment was passed down the chain to subcontractors.

Without long-overdue reform to ensure payment to subcontractors, Mr Murray said good tradies would continue to go to the wall.

Building industry insolvencies in NSW hit a four-year high in March and nationally the industry is estimated to leave $3 billion worth of bills unpaid each year.

A 2015 Senate report into insolvency in construction estimated each year there were $630 million in unpaid subcontractors payments, employee entitlements and tax debts.

Mr Murray, a 40-year building industry veteran, described payment in some sectors of the construction industry as "appalling".

"Many of these $2 companies are phoenixed to avoid paying subcontractors, it happens all the time," he said. "This is an industry that has been built off the backs of tradies who don't get paid."

Mr Murray spoke to the Newcastle Herald this week following revelations that two Hunter-based men have been accused by a Supreme Court judge of phoenixing building companies to avoid paying subcontractors.

Companies linked to Daniel Roberts and Shashanth Shankar have left a trail of building and financial disasters across the Hunter costing tradies, developers, suppliers and homeowners millions.

Justice Robert McDougall launched a scathing attack on the pair accusing them of "misusing, if not abusing" the system that determines payment in the building industry, known as the Security of Payment Act.

"There is, in my view, very strong evidence that Mr Roberts and Mr Shankar have engaged in structuring their affairs in such a way so as to avoid, wherever possible, paying their liabilities...," Justice McDougall said. "It is open to infer that they have engaged in the well-known but opprobrious practice of utilising phoenix companies: consigning insolvent companies to the fires of liquidation, and creating new companies to arise from the ashes and take their place."

Numerous tradies who spoke to the Newcastle Herald said they gave up chasing payment from companies linked to the men because it was costing them too much time and money.

Carpenter Aaron Mullins said he was forced to close his business following a dispute over non-payment. "The debt escalated to well over $30,000 to chase a $15,000 invoice," he said.

Like several people who have gone public about their dealings with Mr Roberts and Mr Shankar, Mr Mullins said when he took legal action to enforce payment he was faced with a counter-claim.

"For small operators it just becomes too much," Mr Mullins said. "The system doesn't work to help the tradies on the ground, we have no power."

Mr Murray agreed that there is a "massive power imbalance" in the construction industry, created by a "cascading hierarchical system" that resulted in many subcontractors accepting "appalling conditions".

"Many subcontractors fear retribution if they pull a security of payment claim on a head contractors because they won't get repeat work," he said. "The head contractors take whatever conditions the client wants because they assign it to the subcontractors on a take it or leave it basis."

Subcontractors, many of them small businesses, perform about 85 per cent of all building work in Australia.

In February, the Building Ministers' Forum agreed to the development of model legislation for statutory trusts.

It's understood HoustenKemp Economists have been working with the NSW government on analysing the financial impact of implementing statutory trusts.

A spokesman for NSW's Minister for Better Regulation and Innovation Kevin Anderson said subcontractors needed greater protection.

"We need to help protect sub-contractors from unfair payment practices, which is why the NSW government has implemented a range of new strategies to ensure those who put the hard work in, get paid the money they are owed, when they are owed it," he said.

"The NSW government has been seeking feedback on a proposal to introduce extra protections, as suggested in the Murray Report, and continues to lead the nation in the research and development of nationwide, model legislation for statutory trusts for jurisdictions to draw upon."

Mr Murray said a statutory trust system was being introduced in Western Australia. He said without the political will to introduce a trust system in NSW, "many fine tradies would be left haemorrhaging" because it's the "people who do the work that don't get paid".

A trust system would keep money intended for subcontractors down the chain intact even if the builder fails.

"It is designed to get rid of the cowboys and provide the appropriate protection to parties who carry out the work," Mr Murray said. "If you are found in breach of the the trust you go to jail."

Building industry bodies oppose the idea, fearing more red tape and increased costs. According to the Housing Industry of Association (HIA), trust arrangements will not stop insolvencies or guarantee payments to subcontractors.

"They will however impose additional costs for residential building work that will impact housing affordability," the organisation stated in a submission to the NSW government last year.

"The use of trust funds will not stop unethical conduct or unscrupulous behaviour nor stop spending of monies purportedly held in trust. It is impossible to fully legislate against this behaviour and it is unfair to impose harsh obligations on the majority of builders operating in the industry who do pay their contractors on time and operate lawful and compliant businesses."

In a court case involving Mr Roberts and Mr Shankar, two tradesmen gave evidence about being caught up in a web of interrelated companies and not being paid for work on a Jesmond apartment development.

The builder, DSD Builders, subcontracted work out to related company, BH Australia Constructions, but the tradesmen were contracted through another related company, Blissful Building Procurements, that was later placed in liquidation which meant the workers did not get paid.