In Taxation

The Queensland Building and Construction Commission (QBCC) supports the growing Queensland community by providing information, advice and regulation to ensure the maintenance of proper building standards and remedies for defective building work. By doing this, they promote confidence in the building and construction industry. Led by the Commissioner and governed by a board, the QBCC consists of a skilled and expert team of staff that work hard to meet the needs of industry participants and the community.

In Queensland, individuals and companies must hold a QBCC licence to carry out building work:

  • Valued over $3,300
  • Valued over $1,100 where it involves Hydraulic Services Design
  • Of any value where it involves:
    • Drainage
    • Plumbing and Drainage
    • Gas Fitting
    • Termite Management – Chemical
    • Fire Protection
    • Completed Residential Building Inspection
    • Building Design – Low Rise, Medium Rise and Open
    • Site Classification
    • Mechanical Services

In 2019 the Queensland Government introduced the Minimum Financial Requirements (MFR) Regulation. This regulation re-introduced mandatory annual reporting for all Queensland Building and Construction Commission (QBCC) licensees who hold a contractor grade licence. The only exemptions are for people who hold a Nominee Supervisor or Site Supervisor licence. The purpose was to reduce bankruptcy within the industry and to ensure that people and entities are paid for their work.

The QBCC issues a licence once you have shown that you have the required working capital. The new law means that you must now also report your financial information each year.

There are differences between Annual Reporting and MFR Reporting

• An MFR report must be prepared by a qualified accountant who is independent of the licensee
• Annual reporting does not require an accountant and can be done easily online
• MFR reports are more complex and detailed than annual reporting
• An MFR report is only required when you first apply or make financial changes to your licence
• Annual financial reporting must be submitted by the required reporting day each year

Blue Dragon Business Services provides advice on the financial requirements for licensing and can prepare MFR reports as required by the legislation. We have an in depth understanding of not only the BAS, GST and other taxation obligations of builders and tradies, but also the complex area of MFR reports.

When do you need to report your MFR?

Licensees are required to report their financial information at certain times including:
• When obtaining a new licence
• Increasing or decreasing a licensee’s maximum revenue
• Where the net tangible asset position has decreased by more than:
30% for licensees within categories SC1, SC2 and categories 1-3
20% for licensees within categories 4-7.
• On expiry of the licensee’s professional indemnity insurance policy
• On request by the licensee
• Significant change to the structure of the business
• Restructure of partnership
• Change or withdrawal of covenantors
• When requested by the QBCC

How MFR is Calculated

The QBCC calculates the financial viability of a business using the minimum Net Tangible Assets (NTA) and the Current Ratio of your assets versus liabilities. In order to calculate this, licensees must submit annual financial reporting information to the QBCC. The minimum Current Ratio calculation depends on whether your business structure is set up as an individual, partnership, trust, company, or part of a consolidated group of companies.

The ratio calculation also depends on what category your license falls under:
• Self-Certification Category 1 (SC1) – annual turnover up to $200,000
• Self-Certification Category 2 (SC2) – annual turnover up to $800,000
• Category 1-3 licensees – annual turnover between $800,000 and $30,000,000
• Category 4-7 licensees – annual turnover over $30,000,000
Higher reporting standards are required for category 4-7 licensees.

Current Ratio

The current ratio shows the amount of current assets of a business in relation to its current liabilities and it helps determine financial viability. The minimum current ratio for a licensee is 1:1. Which means you must have at least $1 in current assets for every $1 of current liabilities.

The current ratio calculation also depends on your business structure:

  • Individuals – personal current assets and current liabilities
  • Partnerships – a combination of the partnership’s and the licensed partner’s current assets and current liabilities
  • Trusts – a combination of the trust’s and the trustee’s current assets and current liabilities
  • Companies – the current assets and current liabilities of the company

Net Tangible Assets

Net Tangible Assets (NTA) is the total assets of a business, less any intangible asset such as goodwill, patents, and trademarks, less all liabilities. Your NTA will determine your maximum revenue (MR) that you can earn in the coming year.

Note that the following assets are NOT counted in the calculation:

  • Personal furniture
  • Investments or shares in companies that aren’t publicly listed
  • Investments values using equity accounting methodology
  • Units in trusts that are not publicly listed
  • Trade or barter dollars
  • Assets assured to another licensed entity
  • Boats, ships, jet skis, planes, helicopters, racehorses and racing cars
  • Collectors’ items such as paintings, stamps, coins
  • Contingent assets
  • Uninvested superannuation benefits
  • Life or income protection insurance policy benefits

Exceeding Gross Maximum Revenue

You can exceed your Maximum Revenue (MR) by up to 10 per cent without obtaining prior approval from QBCC. If you are going to exceed your MR by more than 10 per cent, you must provide to QBCC either a new financial declaration or Minimum Financial Requirements Report that supports the increase. This must be done prior to exceeding the MR. To increase or decrease turnover over $800,000, a Minimum Financial Report would need to be prepared by an accountant.

We are specialists in this area and have experience with the calculation of the ratios, what deductions you can make, and what things are excluded. If you are a builder or a tradie, Blue Dragon Business Services can prepare your detailed MFR report and annual report, ensuring you both meet and maintain compliance with the QBCC regulations.

Blue Dragon Business Services are tax agents and virtual cfo’s located in Cooroy, in the heart of Noosa Hinterland. We service all areas of the Sunshine Coast and South-East Queensland including Brisbane, Gympie, Ipswich and Logan  for tax, BAS and bookkeeping. We also practice as virtual CFOs, take on interim CFO engagements as well as financial management, reengineering and restructures including business turnarounds, transformations and expert financial modelling.

Take a load off your mind and call us for your obligation free consultation.

Let’s chat about your business today. 

E: michael@bluedragongroup.com.au

P: 07 5412 7111