Key Takeaways

In this article

Why builders are caught Which types of builders are affected? The legal definition What builders must do Common misconceptions Penalties for non-compliance Timeline — key dates How to get ready before July 2026 Frequently asked questions

Why Builders Are Caught by Tranche 2

Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act is expanding. From 1 July 2026, the law covers “real estate professionals” — and that term is far broader than most builders realise.

Under the legislation, anyone who sells real estate as part of a business is providing a “designated service.” That includes builders who sell completed homes, house-and-land packages, or spec builds directly to the end buyer. It does not matter whether you hold a real estate licence or not. If you are the seller, you are caught.

The rationale is straightforward: property is one of the most common vehicles for money laundering globally. FATF (the Financial Action Task Force) identified Australian real estate as a significant ML/TF risk. The Tranche 2 reforms close the gap by bringing everyone involved in property sales — agents, conveyancers, developers, and builders — under the AML/CTF framework.

Which Types of Builders Are Affected?

The short answer: if you sell property directly to a buyer as part of a business, you are a reporting entity. Here is the breakdown by builder type:

Builder Type Caught? Why
Volume builder (Metricon, Simonds, Henley) Yes Sells house-and-land packages directly to buyers
Custom home builder Yes Enters contracts to build and sell on the builder’s own land
Display home seller Yes Sells display homes at end of display period directly to buyers
Knockdown-rebuild (on builder’s land) Yes Acquires, demolishes, rebuilds, and sells — builder is the vendor
Spec home builder Yes Builds speculatively and sells completed homes to market
Builder on owner’s land (contract to build only) No* Building on the client’s land — the client already owns the property
Subcontractor No Contracted by the builder, not selling property

*Important distinction

If you only build on the customer’s existing land (a pure construction contract), you are not selling real estate and are not caught. But if you also buy land, build, and sell the finished product — even occasionally — those transactions are designated services. Many builders do both. If even one arm of your business involves selling property you own, you must comply.

The AML/CTF Act defines a “real estate professional” as any person who, by way of business, provides services relating to the buying or selling of real estate. This sits alongside the existing definitions covering real estate agents, conveyancers, and property developers.

The key phrase is “by way of business.” If selling property is part of your regular commercial activity — not a one-off personal sale — you are providing a designated service. There is no minimum number of transactions, no revenue threshold, and no exemption for small operators.

This means a builder who sells just 3 spec homes per year has the same obligations as a volume builder selling 500 homes annually. The obligations scale with risk, but they apply equally.

What Builders Must Do

Once the law takes effect, builders who are reporting entities must meet six core obligations:

Your 6 AML/CTF obligations

1 Enrol with AUSTRAC — Register as a reporting entity via AUSTRAC Online. Enrolment opens 31 March 2026. You must be enrolled before providing any designated service after 1 July.
2 Create an AML/CTF program — A written compliance program covering Part A (identify, mitigate, and manage ML/TF risk) and Part B (customer due diligence procedures). This must be tailored to your business, not a generic template.
3 Conduct Customer Due Diligence (CDD) — Verify the identity of every buyer before or at the point of entering a contract. This includes collecting ID documents, verifying identity electronically, and understanding the purpose of the transaction.
4 Screen against sanctions lists — Check every buyer against the DFAT consolidated sanctions list and, where applicable, PEP (Politically Exposed Person) databases. This must be done at onboarding and periodically throughout the relationship.
5 Report suspicious matters — If you form a suspicion that a transaction involves proceeds of crime or terrorism financing, you must lodge a Suspicious Matter Report (SMR) with AUSTRAC within 24 hours (for terrorism) or 3 business days.
6 Keep records for 7 years — All CDD records, transaction records, and compliance documentation must be retained for a minimum of 7 years after the relationship or transaction ends.

Common Misconceptions

“I’m a builder, not a real estate agent”

The law does not care about your licence type. It cares about the service you provide. If you sell property directly to buyers, you are providing a designated service — regardless of whether you hold a builder’s licence, a developer’s licence, or a real estate agent’s licence.

“I only sell 5 homes a year — surely I’m too small”

There is no minimum threshold. If selling property is part of your business activity, you must comply. AUSTRAC has specifically stated there is no small business exemption for Tranche 2 reporting entities.

“My solicitor handles all the legal stuff”

Your solicitor manages conveyancing and settlement. They cannot conduct your AML obligations on your behalf. As the vendor, you are the reporting entity. Your solicitor will have their own, separate AML obligations as a legal professional — they are not a substitute for yours.

“I sell through a real estate agent, so they do the AML”

If a buyer engages directly with your sales team or display village — even if an agent is also involved — you may still be providing a designated service. The safest position is to treat every direct sale as a reportable transaction. If an external agent is the sole point of sale and you have no direct contact with the buyer, the agent carries the obligation. But in practice, most builders have direct buyer engagement.

Penalties for Non-Compliance

AUSTRAC has enforcement powers and is not shy about using them. The penalties for failing to comply with AML/CTF obligations are severe:

Penalty framework

! Civil penalties: Up to $23.1 million for companies and $4.6 million for individuals per contravention. Multiple breaches can be aggregated.
! Criminal penalties: Failure to report suspicious matters or tipping off a customer about an SMR carries criminal sanctions, including imprisonment.
! Infringement notices: AUSTRAC can issue on-the-spot fines for specific breaches without going to court.
! Reputational damage: AUSTRAC enforcement actions are published publicly. For builders operating in competitive markets, an AUSTRAC action can damage buyer and partner confidence.
! Licensing risk: Non-compliance with federal AML obligations can affect your state builder’s registration and professional indemnity insurance.

For context, AUSTRAC’s most significant enforcement action resulted in a $1.3 billion penalty against a major bank. While builder penalties will be proportional, even a six-figure fine would be devastating for most building companies.

Timeline — Key Dates

Date What Happens
31 March 2026 AUSTRAC enrolment portal opens for Tranche 2 entities
1 July 2026 AML/CTF obligations begin — all reporting entities must be enrolled, have an AML/CTF program in place, and be conducting CDD on new customers
1 July 2027 First annual compliance reports due to AUSTRAC
1 July 2029 First independent review of AML/CTF program due (within 3 years of commencement)

How to Get Ready Before July 2026

You have approximately three months. That is enough time if you start now. Here is a practical checklist:

Builder compliance checklist

1 Determine which parts of your business are caught. Use the AUSTRAC eligibility checker and map every transaction type — house-and-land, spec builds, display home sales — and identify which ones involve you selling property directly.
2 Enrol with AUSTRAC. The portal opens 31 March 2026. You need your ABN, business details, and the name of your AML/CTF compliance officer.
3 Appoint a compliance officer. This can be the business owner, an existing manager, or an external provider. They must have sufficient authority to implement the program.
4 Conduct an ML/TF risk assessment. Evaluate your customer base, transaction types, delivery channels, and geographic exposure. The AUSTRAC real estate starter kit provides a template. This forms the foundation of your AML/CTF program.
5 Write your AML/CTF program. Part A covers risk identification and mitigation. Part B covers customer identification procedures. Use a platform like AMLTranche to auto-generate a compliant program based on your risk assessment.
6 Train your sales and admin staff. Anyone who deals with buyers needs to understand CDD procedures, red flag indicators, and how to escalate suspicious matters. Training records must be kept.
7 Set up CDD and screening processes. Before exchanging contracts with any buyer after 1 July, you must verify their identity and screen them against sanctions lists. Build this into your standard sales workflow.

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Frequently Asked Questions

Do home builders need to comply with AML/CTF laws?

Yes. If you build and sell properties directly to buyers — whether house-and-land packages, display homes, or spec builds — you are providing a designated service under the AML/CTF Act and must comply from 1 July 2026.

What if I only build 5 homes a year?

There is no minimum threshold. Whether you sell 5 or 500 homes per year, if you sell directly to buyers as part of a business, you are a reporting entity and must enrol with AUSTRAC and meet all AML/CTF obligations.

Does my solicitor handle AML compliance for me?

No. Your solicitor manages conveyancing, not your AML obligations. As the seller, you are the reporting entity. You must conduct your own CDD, sanctions screening, and suspicious matter reporting.

What happens if I don’t comply?

Civil penalties of up to $23.1 million for companies and $4.6 million for individuals. AUSTRAC can also issue infringement notices and enforceable undertakings. Non-compliance can affect your builder’s licence and insurance.

When do I need to register with AUSTRAC?

Enrolment opens 31 March 2026. All reporting entities must be enrolled and fully compliant by 1 July 2026. Start early to allow time for program setup and staff training.