QBCC Licence Compliance: Understanding Your Reporting Requirements

For operators within the Building & Construction industry, adhering to regulatory compliance and financial reporting is crucial for meeting the requirements set by the Queensland Building and Construction Commission (QBCC). This ensures the ongoing validity of the QBCC licence and the ability for businesses to complete existing work and undertake new projects.

Many builders and other operators who are required to hold a QBCC licence are often caught out by the stringent financial reporting obligations. Outlined below are the commonly asked licence questions and the QBCC obligations you need to be aware of.

Why are both company and individual licences required for QBCC purposes?

When applying for a QBCC licence to operate through a company or a trust with corporate trustee structure, it is important to note that you will require both an individual licence and one for the company.

For QBCC purposes, individuals and companies must hold a QBCC licence to carry out building work, where the project is:

• valued over $3,300
• valued over $1,100 where it involves 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.

The individual licensee (in the same class as the company licence) 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 submit a minimum financial requirements (MFR) report to lodge financial information, unlike a company, whose requirements will vary based on the category of licence held.

What are the annual financial reporting requirements?

The annual financial reporting requirements are determined by the financial category of licence the entity holds, which is based on the annual turnover of the business and whether the business has sufficient net tangible assets (NTA) to support the level of income. The QBCC limits the maximum annual revenue a licensee can earn based on the value of their net tangible assets.

There are nine financial categories of QBCC licences which are outlined below based on the net tangible asset position of the business. Licensees must ensure they maintain the minimum level of net tangible assets for their turnover level.

How is the net tangible asset value for QBCC reporting purposes calculated?

A licensee’s net tangible assets are the total assets of a business, less any intangible assets such as borrowing costs, goodwill, patents & trademarks, less all liabilities and disallowed assets. Examples of disallowed assets include recreational vehicles, boats, personal furniture, collectors’ items, unlisted investments or shares, cryptocurrency and related entity asset loans which do not meet the definition outlined in section 15(1)(k) of the MFR Regulation. A full list of disallowed assets can be found on the QBCC website.

How do related party loans impact my net tangible assets?

When ensuring the company is meeting the financial requirements of their licence that they qualify for, it is important to consider the impact of related entity and shareholder loans. If the company owes money to a related entity or shareholder, these will be included in the NTA calculation and will reduce the net tangible asset position.

However, if a related entity or shareholder owes money back to the company, these loans will not necessarily be included in the NTA calculation. They can only be included if they meet the definition outlined in section 15(1)(k) of the MFR Regulation as mentioned above. The regulation states that a loan given by the licensee to a related entity can only be included if on the day the licensee’s assets are worked out, the related entity –    

• holds net tangible assets in its own right, excluding any deed of covenant asset, of at least $0; and
• has a current ratio of at least 1.

To avoid the additional reporting requirements from relying on these loans to meet your minimum NTA requirements, businesses must monitor the other assets of the business to ensure these are at sufficient levels.

What happens if my net tangible assets drop by 30%?

Should the net tangible assets of a company fall by 30%, an MFR report is required to be prepared and signed by a qualified accountant. The report is prepared based on financial information of the business which is no more than four months old. Supporting documents that must accompany an MFR report include financial statements, aged debtors & creditors reports and a statement of cashflows.

The QBCC requires the report to be prepared to confirm that the business is not at risk of default and to determine if the maximum allowable revenue of the business is required to be decreased. In situations where the net tangible assets drop by more than 30% and an MFR report is not submitted as per the reporting obligations, the licensee may face penalties, a suspension or cancellation of their licence.

What happens if I exceed my maximum allowable revenue threshold?

A licensee can exceed their maximum revenue by up to 10% without obtaining prior approval from QBCC, therefore it is important for businesses to monitor their turnover. If it is anticipated that revenue will increase more than 10%, a MFR report will be required to be prepared and submitted to the QBCC within 30 days of exceeding the 10% turnover threshold to show that the business has sufficient net tangible assets to support the increased maximum allowable revenue.

What is the current ratio and what is the minimum requirement?

The current ratio is a liquidity ratio that measures an entity’s ability to meet its short-term obligations that are due within one year. For QBCC licensees, maintaining an acceptable current ratio is essential in demonstrating the financial viability of the business. The minimum required current ratio is 1:1, meaning that there should be at least $1 of current assets for every $1 of current liabilities.

It is important to note that you must always meet the minimum current ratio level at all times throughout the year.  In addition, rounding up the ratio to meet the required threshold is not allowed and certain assets such as borrowing costs, formation costs, goodwill, patents & trademarks and uncollectable debts or receivables are excluded from the calculation. A full list of excluded current assets can be found on the QBCC website.

What are the QBCC reporting deadlines?

The QBCC has specific timeframes and due dates for financial reporting based on the different licence categories.

• For self-certifying 1 and self-certifying 2 categories, the lodgement period is from 1 November and is due by 31 March.
• For categories 1-7, the lodgement period is from 1 August and is due by 31 December.
  
  

For More Information

For more information on the Queensland Building & Construction Commission’s licensing requirements, understanding your QBCC reporting obligations or for assistance in lodging your financial information, please contact Greg Rankin – Manager or Smiljan Jankovic – Managing Director on (07) 3002 2699 or via email (gregr@agredshaw.com.au; smiljanj@agredshaw.com.au).