Proposed QBCC licence changes: What will they mean for your construction business?

Article by Robyn Tyler


In the wake of a number of high profile collapses and insolvencies in the local construction industry, the Queensland Building and Construction Commission (QBCC) is proposing changes to the Minimum Financial Requirements (MFR).

The proposed QBCC licence changes aim to:

  • Strengthen reporting requirements;
  • Provide clarity about what can be included with calculating a licensee’s revenue and assets; and
  • Develop data quality and availability for QBCC.

But what will these proposed changes mean for your construction business?

QBCC licence changes: What will the main changes mean for you?

Licensees will be affected in different ways, depending on the category of licence you hold and your revenue:

  • All licensees will be required to provide financial information to QBCC each year (this used to be a requirement until 2014).
  • Annual reporting will use existing reporting requirements where possible. For example, licensees who currently provide copies of audited ASIC reports can continue to do so.
  • Categories SC1 and SC2 (maximum revenue of $600k) will:
    • Be able to self-certify that they are meeting requirements. The revenue threshold will also be increased to $800k.
    • Need to report their current ratio of assets to liabilities. At this stage, there is a planned online reporting tool for licensees to use.
  • Categories SC1 to Category 3 (turnover up to $30M) will:
    • Continue to be required to report decreases in Net Tangible Assets of 30 percent or more.
  • Categories 4 to 7 (turnover of greater than $30M) will:
    • Be required to report decreases in Net Tangible Assets of more than 20 percent. More sensitive reporting triggers will be introduced for high risk licensees to let QBCC know earlier of changes in financial position.
    • Need to use a “Balanced Scorecard”, requiring licensees to provide more detailed information, which may allow QBCC to better detect potential insolvencies.

Calculating assets and revenue

There are also some changes to how you will calculate assets and revenue, as follows:

  • Personal recreational vehicles, such as golf carts and dirt bikes, will not be able to be included in minimum asset thresholds. These types of vehicles are considered to have limited value and should not be used to increase the business asset position.
  • It will be clarified when money held in a Project Bank Account can be included as a licensee’s asset or revenue:
    • Both head contractor and subcontractors will be able to include any amount in the general trust account they have a beneficial interest in, as an asset;
    • Subcontractors will also be able to include retention amounts and disputed funds that are related to them.

Data quality and availability

As part of the QBCC licence changes, measures are also being proposed to improve data quality and availability:

  • QBCC will be able to seek advice from an independent, qualified accountant to substantiate information in an MFR report.
  • Licensees who provide incorrect information may need to meet the costs of independent assessment.
  • Where a licensee relies on a Deed of Covenant, they will need to provide QBCC with detailed financial information about the covenantor.
  • Similar requirements will be introduced for related entity loans, so QBCC can assess whether the loans are collectable.

How will the changes be implemented?

The reforms will be introduced in stages. Phase one will commence on 1st January, 2019 and includes:

  • The re-introduction of compulsory annual reporting;
  • The requirement for larger licensees to report decreases in Net Tangible Assets of greater than 20 percent; and
  • The changes to calculation of a licensee’s assets: the exclusion of recreational vehicles and when to include Project Bank Account funds.

Phase two will implement the remaining reforms in relation to the standard of reporting.  This is likely to start on 1st April, 2019.

This phase will also allow for stronger enforcement provisions.

What happens if you fail to abide by the QBCC licence changes?

Penalties for not complying with MFR will be included in the regulations and existing penalties will continue to apply after the QBCC licence changes have come into play.

QBCC is able to place conditions on a licence or take steps to suspend or cancel a license.

Penalties also apply for providing misleading or false information, or refusing to supply financial information at the QBCC’s request.

As mentioned, phase two intends to strengthen the enforcement provisions.  This will include imposing executive officer liability and increasing penalties.  

If you would like to know more about what these changes mean for your business, please contact SRJ Walker Wayland here.