Changes to the Minimum Financial Requirements (MFR) for licensing in the building and construction industry in Queensland

Summary of Changes

The new Minimum Financial Requirements (MFR) Regulation for QBCC licensees came into effect on 1 January 2019.  Under the new laws, all QBCC licensees who hold a contractor grade licence will be required to meet annual financial reporting obligations.

Licensees will need to provide financial information to the QBCC each year on or before their annual reporting day.  The QBCC is required to give all existing Licensees a written notice stating the annual reporting day for the Licensee.  The information can be lodged on-line on the myQBCC portal.

Existing Categories SC1 and SC2 will continue to self-certify and the threshold will be raised from $600,000 to $800,000.  Self-certifying licensees will need to report their revenue and Current Ratio (i.e. ratio of current assets to current liabilities) to the QBCC by 31 December 2019.

Existing Licensees within financial category self-certifying 1 (SC1) to category 3, whose maximum revenue is less than or equal to $30 million, will need to submit the required financial information to the QBCC by 31 December 2019.  The QBCC will send out reminders in the near future. 

Licensees in categories SC1 to category 3 will also be required to report subsequent decreases of 30 per cent or more in Net Tangible Assets to the QBCC.

Existing Category 4 to 7 licensees (maximum revenue more than $30 million), will need to provide financial information to the QBCC by 31 March 2019. This includes Profit and Loss Statement, Balance Sheet, debtors and creditors report and cash flow statements. The QBCC have advised that at this stage they will not be sending reminders to licensees in this category.  Please contact your Moore Stephens advisor as soon as possible so that we can assist you to meet this deadline.

Licensees in category 4 to 7 will also be required to report subsequent decreases of more than 20 per cent in Net Tangible Assets.

If a licensed company is required to provide an auditor's report or review report to ASIC or ASX, the licensee must provide the QBCC with a copy of these reports within 30 calendar days of the reports being signed and/or submitted to ASIC or ASX. A separate report to the QBCC will not be required.

Going forward Licensees will be required to lodge the financial information for the most recent reporting year on or before the annual reporting day.  The reporting year will generally be the financial year ending 30 June unless a different day (a) is agreed between the Licensee and the QBCC or (b) is used for lodging with ASIC or ASX.  It will be possible for Licensees to request a different annual reporting day.

Calculating assets

Personal recreational vehicles, such as dirt bikes and golf carts, can no longer be used to meet minimum asset thresholds. 

Money held in a project bank account can be included as an asset of a licensee as follows –
 
  • Head contractors and subcontractors will be able to include any amount in the general trust account in which they have a beneficial interest
  • Subcontractors will be able to include retention amounts and disputed funds that relate to them
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 need to be provided to the QBCC to substantiate.

The QBCC website has further information in respect of accounting requirements for:
 
  • Leases
  • Revenue from construction contracts
  • Construction work in progress
  • Line of credit facilities
  • Cryptocurrencies

Implementation of Changes

The above changes will be implemented in phases.  Phase 1 commenced on 1 January 2019 as follows –

  • Re-introduction of mandatory annual reporting
  • Requirement for larger, higher risk licensees to report decreases in Net Tangible Assets of 20 per cent or more
  • New method of calculating a licensee’s assets with the exclusion of recreational vehicles and when to include Project Bank Account funds.
Phase 2 will implement the remaining reforms with a later commencement date of 1 April 2019.

Failure to meet requirements

Penalties for not complying with the Minimum Financial Requirements have been included in regulation. Under the Act, the QBCC can place conditions on a licence, or take steps to suspend or cancel a licence.

Penalties also apply for providing false or misleading information or refusing to supply financial information at the request of the QBCC.

More information

For further information and assistance, please contact your local Moore Stephens advisor who will guide you through the new requirements.