Changes to the QBCC Minimum Financial Requirements: What it means for Contractors?
In December 2018 the Queensland Government introduced amendments to the minimum financial requirement (“MFR”) laws for QBCC contractor grade licensees.
Key changes include the re-introduction of mandatory annual financial reporting for all licensees, clarification as to the treatment of certain assets
of the licensee, and the introduction of various enforcement and penalty provisions to be utilised by the QBCC against licensees who fail to comply
with their obligations.
The amendments have been introduced in phases. Phase one began on 1 January 2019 and introduced rules relating to the reporting of changes to net tangible
assets (“NTA”), the re-introduction of the mandatory annual reporting and the new method of calculating a licensee’s assets. Phase 2 dealt with
the remainder of the reforms and commenced on 2 April 2019.
Depending on their licence category, licensees may now be required to provide more detailed financial information to achieve compliance.
Licensees in categories SC1 and SC2 (with annual turnovers of up to $200,000 and $800,000 respectively) do not need to provide detailed financial
statements and supporting documents but are required to report their revenue and current ratio (ie- ratio of current assets to current liabilities)
and provide a declaration that the information is accurate. This information must be provided to the QBCC by 31 December 2019. If their NTA
position decreases by greater than 30% of their most recently accepted NTA position, they must report this to QBCC.
Licensees in categories 1-3 (with annual turnover between $800,000 and $30,000,000) are now required to provide detailed supporting documentation
such as profit and loss statements, cashflow statements, balance sheet, debtors and creditors report and trust financial statements. This information
must be provided to the QBCC by 31 December 2019. They also must report if their NTA position decreases by greater than 30% of their most recently
accepted NTA position.
Licensees in categories 4-7 (with annual turnovers of over $30,000,000) will have already been required to submit their financial reports to QBCC
by 31 March 2019. Licensees in this category are required to report to QBCC if their NTA position decreases by greater than 20% below their
most recent accepted NTA position.
QBCC licence holders will need to be cautious in monitoring any reduction in their NTA position to ensure compliance with their obligations as
QBCC require notification of any such decrease to occur within 30 days. Further, if a licensee is relying on a Deed of Covenant and Assurance
and/or related entity loans to help them meet the financial requirements, detailed financial information will also need to be provided to the
QBCC to substantiate those.
It is important for contractors not to be complacent with these new reporting obligations. If you have not already spoken with your Accountant about
your financial reporting requirements, we recommend that you do so immediately to ensure you are compliant. Non-compliance with these laws can
lead to suspension or cancellation of your QBCC licence, amongst other penalties. A suspension of your licence can bring your business to an immediate
standstill, which can severely impact your cashflow and lead to insolvency.