For operators within the Building & Construction industry, maintaining regulatory compliance and financial reporting is essential in complying with obligations set by the Queensland Building & Construction Commission, ensuring continuation of QBCC license and the ability to complete and undertake new projects & work.
As we move towards reporting deadlines set for 30 June 2022, we’ve noted the commonly asked questions and licensing submission considerations often overlooked when lodging financials at the due date:
Why are both Company and Individual Licenses required for QBCC Purposes?
When applying for a QBCC license to operate through a Company or a Trust with Corporate Trustee structure, it is important to note that you will require an Individual license – alongside one for the Company.
For QBCC purposes, Individuals and Companies must hold a QBCC License to carry out building work, where the project is:
- valued over $3,300
- valued over $1,100 involving Hydraulic Services Design
- of any value where it involves - drainage, plumbing & drainage, gas-fitting, termite management (chemical), fire protection, completed residential building inspection, building design (low rise, medium rise, open), site classification, or mechanical services
This Individual License (in the same class as the Company license) will then operate as a ‘Nominee Supervisor’ of the company completing the projects. The Nominee must be an employee or Director of the company and provides on-site supervision of the work undertaken.
An important note is that the ‘Nominee Supervisor’ is not required to lodge financial information through a MFR Report like a Company – whose requirements will vary based on the level of license that is obtained.
What are the Net Tangible Asset Values for QBCC Reporting Purposes?
One of the financial requirements for a QBCC License is maintaining a minimum level of Net Tangible Assets (NTA). Your NTA is an adjusted amount based upon your company owned assets less company owed liabilities. The required Net Tangible Assets differs for each of the QBCC Financial Categories and is calculated on that category’s Maximum Allowable Review (ie. turnover over a 12-month period).
We’ve outlined the Net Tangible Assets requirements per the QBCC below:
| Financial Categories | Maximum Revenue | Net Tangible Assets |
| Self-Certifying 1 | Up to $200,000 | $12,000 |
| Self-Certifying 2 | Up to $800,000 | $46,000 |
| Category 1 | $800,001 - $3,000,000 | $46,001 - $156,000 |
| Category 2 | $3,000,001 - $12,000,000 | $156,001 - $480,000 |
| Category 3 | $12,000,001 - $30,000,000 | $480,001 - $1,200,000 |
| Category 4 | $30,000,001 - $60,000,000 | $1,200,001 - $2,400,000 |
| Category 5 | $60,000,001 - $120,000,000 | $2,400,001 - $4,800,000 |
| Category 6 | $120,000,001 - $240,000,000 | $4,800,001 - $14,400,000 |
| Category 7 | >$240 million | >$14.4 million |
Additionally, the above Net Tangible Assets for Company structures amounts are calculated per the following:
Net Tangible Assets = [Entity’s Assets] – [Entity’s Liabilities] – [Entity’s Intangible Assets*] – [Entity’s Disallowed Assets**]
* Examples of Intangible Assets include: goodwill, borrowing costs, patents, and trademarks | ** Examples of ‘Disallowed Assets’ include: boats, collector items, personal furniture, superannuation, etc.
Similarly, for Sole Trader structures, Net Tangible Assets are calculated as Personal Assets less Personal Liabilities. It is important you continually monitor your NTA, ensuring you maintain your Financial Category.
What Happens if my Net Tangible Assets drop by 30 per cent?
Should the Net Tangible Assets of a company fall by 30 per cent, an Independent Review Report is required to be prepared and signed by an Accountant, and submitted to the QBCC alongside documented financial information (such as signed Financial Statements, Trading Profit/Loss Statements, Balance Sheets, last Financial Year-End Accounts, or current Financial Year-to-Date accounts).
The purpose of the Independent Review Report should confirm that the business is not at risk of default and a reduction of QBCC licensing level is required. Where there is a reduction in QBCC Licensing level, a resubmitted Minimum Financial Requirements Report is required at the new Maximum Revenue level or Financial Category.
It is important to note, that in cases where NTA drops by more than 30% and a new MFR Report is not submitted per the obligations, penalties or a license revoke may occur.
What Happens if I Exceed my 'Maximum Allowable Revenue' Threshold?
Similar to the above NTA, it is a requirement of your QBCC license that you monitor your financials regularly to ensure you will not exceed your allowable turnover by more than 10%.
Should you exceed the Maximum Allowable Turnover by 10%, you may be subject to an audit from the QBCC. Alongside this, you must report a turnover increase – lifting the Financial Category limit of your license and ensure you have sufficient assets to allow for this.
Additionally, in lifting your license, you must lodge a new Minimum Financial Requirements Report to support the uplift and category information.
How do Related Party Loans impact my Net Tangible Assets?
When ensuring the company is meeting the Financial Requirements of their license that they qualify for, it is important to consider the impact of Shareholder Loans. If the company owes money to the shareholder, this will reduce the Net Tangible Assets (NTA) of the company. However, if the shareholder owes money back to the company – this will not increase the Net Tangible Assets, as this is a disallowable asset.
It is important to note this when looking at the NTA and evidence may be required to show that the related entity can meet the ‘Current Ratio’ criteria and has Net Assets based on the QBCC requirements.
For More Information
For more information on the Queensland Building & Construction Commission’s licensing requirements or for further assistance in lodging your financial information, please contact the Archer Gowland Redshaw office on (07) 3002 2699 | info@agredshaw.com.au.
