As part of the Queensland Government reforms of the building and construction industry, from October 2014 licensees are no longer required to lodge annual financial reports. While this may come as a welcome relief to those affected, it’s important to note there remains a number of ongoing QBCC obligations when it comes to maintaining your licence.The new process means that whilst the annual financial reports are no longer required, licencees must now maintain quarterly internal management accounts. These internal accounts must be monitored regularly and you must be satisfied that they meet the minimum financial requirements that relate to your licence. If you no longer meet the requirements, then you must notify the QBCC and have them updated.Recently, the QBCC have been undertaking random spot checks on licencee financial requirements, so it is important that you have your house in order so as not to have your licence suspended.
So just what are the minimum financial requirements?
The Queensland Building and Construction Board Policy which constitutes the financial requirements for the Queensland Building and Construction Commission Act 1991 (“Act”) consists of:
- Maximum Revenue;
- Net Tangible Assets;
- Current Ratio;
- Payment of Debts;
- Financial Monitoring; and
- Professional indemnity insurance.
The amount of eligible Net Tangible Assets (NTA) that a business has on its balance sheet determines the Maximum Revenue (MR) that the business is able to turnover with the support of those underlying assets. You need to take care when performing this calculation however, as there are a number of assets that aren’t considered eligible for inclusion. To calculate your MR, use the QBCC calculator which is available on its website www.qbcc.qld.gov.au/mr-nta-calculator or if you would like to know more about the ineligible assets, then contact your PT Partners advisor.
The Current Ratio is a measure of a business’ cashflow or liquidity. In essence, the Current Ratio is the businesses current assets divided by its current liabilities.At all times that a business holds a QBCC licence, it must have a Current Ratio measuring 1:1.There are certain definitions as to what a current asset or current liability is. You may need to be aware of these when monitoring your Current Ratio, so if you are uncertain or require assistance, then please contact PT Partners for assistance.
Payment of Debts
There is now a new financial requirement that a licensee must pay all undisputed debts as and when they fall due within industry trading terms. If a judgment debt is not paid on time, the QBCC can suspend or cancel your license.
Financial Monitoring and Reporting
You now have an obligation to monitor your financial position “regularly”. Whilst the QBBC doesn’t specifically state what “regularly” is, they do point to the fact that the majority of businesses would now be reviewing their accounts at least quarterly when preparing their Business Activity Statement at which time they should perform these calculations.You must report to the QBCC if:
- You require an increase in your maximum revenue of more than 10% of your licence terms, or
- Your NTA decreases by more than 30% since the end of the previous financial year
In summing up, under the new QBCC regime, you must:
- Maintain internal management accounts and review them at least quarterly (this is something you should now be doing when preparing your quarterly BAS);
- Ensure you meet the minimum financial requirements in accordance with your licence terms.