A key supporter of the government in the Senate, Family First’s Bob Day, is quitting parliament because of financial problems with the housing group he founded.
The resignation of the South Australian senator first elected in 2013 followed his Home Australia Group of companies going into liquidation, halting construction on 207 new homes in SA, Western Australia, Queensland, Victoria and NSW.
"Having been in business for over 40 years, I am naturally devastated by what has happened and will do whatever I can now to assist those affected by this closure," Senator Day said in a statement on Monday.
All homes under construction were covered by home owners warranty insurance, he said.
Having previously agreed to sign personal guarantees to creditors, he said the closure would mean the loss of his own family home, he said.
"As for my role as a senator, I will of course resign."
The Home Australia group includes Homestead Homes (SA), Collier Homes (WA), Newstart Homes (Qld), Ashford Homes (Vic) and Huxley Homes (NSW).
After selling a 75 per cent stake in Home Australia to Philipines-based Goshen Capital Resources, Senator Day hoped the funds would have enabled the group to trade out of its difficulties.
But he discovered Goshen documentation which appeared to show a transfer from HSBC Manila to CBA Melbourne, and formed the basis of all creditor payment plans, was "fraudulent".
Given the strict trading-while-insolvent rules that apply in Australia, it would not be possible for the business to continue operating until another buyer was found, Senator Day said.
The South Australian businessman built his first house in Adelaide in 1979 and by 1990 Homestead was the state's largest home builder.
"I will be working closely with the liquidator and offering a proposal to enable me to find a way to pay back every debt fully, no matter how long it takes."
Bankruptcy is an automatic disqualification from being a member of parliament.
Liquidator McGrathNicol said customers with homes under construction should contact their insurer.
A meeting of creditors will be held on November 4 or earlier.
Senator Day's chief of staff Rikki Lambert will be a contender for the casual vacancy.
A number of senior Liberals including Tony Abbott paid tribute to Senator Day for his integrity and honesty.
Fellow South Australian senator Nick Xenophon said the incident proved the need for national security-of-payment laws, including a statutory trust to protect sub-contractors.
Labor frontbencher Mark Dreyfus said he suspected the revelation by Solicitor-General Justin Gleeson on Friday that advice had been given to the government on the "composition of the Senate" related to Senator Day's pending resignation.