Attention QBCC Licence Holders
The new Minimum Financial Requirements (MFR) for licensing in the building & construction industry in Queensland started from 1 January 2019. QBCC Licensees will now be required to report to the QBCC annually, similar to the reporting requirements that were in place before 2014. Larger building companies (turnover greater than $30million per year) have already passed their required reporting date of 31 March 2019. License holders with a turnover less than $30 million per year have to report by the 31st of December 2019.
The reporting requirements have been reduced this time around. For category 1 to 3 licensees, you no longer need to provide the MFR report annually. Instead, the QBCC require a copy of your Profit and Loss Statement, Balance Sheet, Aged Debtors and Creditors Report and a Statement of Cash flows. Please note, the QBCC have and are telling licensees that they can simply print these reports from their accounting software and upload them without seeing an accountant first. This may trigger an unnecessary QBCC initiated audit on your business as quite often, the reports from your accounting software require adjustments before they are suitable to send to the QBCC. Another issue that might arise is the treatment of the small business instant asset write off which has just been increased to $30,000. Assets written off instantly for tax purposes need to be adjusted for market value purposes for determining your net tangible assets. If the assets are instantly written off aren’t adjusted for market value, this may be the difference between passing the minimum financial requirements or not.
Self-Certification 1 (turnover under $200,000) and Self-Certification 2 (turnover between $200,000 and $800,000) Licence holders will still self-certify but they will now have to report some extra information each year. Licence holders in this category will now have to report their annual turnover, net tangible assets, and current ratio (current ratio is the ratio between current assets and current liabilities). Again, the QBCC are advising licence holders there is no need to engage an accountant, but reporting the incorrect figures for your current ratio may trigger a QBCC audit.
Before the 31st of December 2019 due date for reporting is a great time to review your current licence for appropriateness. Maybe you have downsized your business and no longer need to be a category one licence holder or perhaps you have that higher turnover based on your asset position in the past but your turnover has never been over $600,000 (the old self-certification 2 category upper limit). Reviewing your licence and updating it may reduce the amount of reporting required by 31 December 2019. Please note, one of the things that hasn’t changed is the requirement to provide a MFR report when applying for a higher turnover (above the SC2 category) with financial information no older than 4 months.
In addition to the changes to the financial reporting requirements, the QBCC have new powers allowing them to penalise licence holders for not reporting to QBCC when they don’t meet the minimum financial requirements. These include but aren’t limited to, a current ratio of at least 1:1, the minimum required net tangible assets to support the reported turnover or a drop in net tangible assets of 30% (20% for licensees with a turnover greater than $30million). It will be more important than ever to ensure your books are up to date and reviewed regularly to ensure you are meeting your minimum requirements.
If you have any concerns about meeting your requirements please contact us as soon as possible to assist you in this regard.