While the core of the QBCC financial requirements may seem very familiar, there have been a number of subtle and bigger picture changes that are significant. In fact, some might say they are game changes.
Some of the bigger picture changes that you need to turn your attention to are:
- Every licence category is now lodging more information than they have in the past. No longer is it simply your financial statements, but you need to include detailed debtor and creditor lists with cashflow statement.
The QBCC is the one doing the annual checks on your data to see if you are meeting the annual financial requirements. No longer is it left to your friendly family accountant. This as I see it, is the game changer.
- We didn’t go back to the requirement of lodging an annual MFR signed off by an accountant. You simply need to lodge your annual financial information with the QBCC in their online portal. Seems easy, but here’s the catch, the QBCC is the one doing the annual checks on your data to see if you are meeting the annual financial requirements. No longer is it left to your friendly family accountant. This as I see it, is the game changer. This has played out over 2019 as the QBCC advertised the licences it suspended.
- SC1 and SC2 licences ($200,000 to $800,000 turnover) are now subject to the additional current ratio requirement and will need to lodge further financial information with the QBCC. I’m not sure this was well thought out by the regulator and is bound to cause issues for smaller licences, let alone more red tape and annual costs.
- Related party loans! I’ve listed this one in earlier blogs, but it keeps deserving more attention. If you are including a loan to a related entity as an asset, it has become very difficult to include this, let alone as a current asset. In the past you only had to prove that the loan was repayable. Now you need to be able to show that the related entity can additionally meet the current ratio and has net assets based on the QBCC requirements. Easier said than done as many licensees have already discovered. If you have related party loans, then you may often find that you need to restructure either your licensed business or the related party before you are able to include this as an asset.
The big game changer as I see it, will be what the QBCC does with their new information when they discover a significant portion of the industry is and has always struggled with meeting the requirements. In my experience it’s often tough for most to meet the rules in the good times, let alone the bad times. Let’s hope that sanity prevails with the regulator in 2020!
Michael Garrone and Ashley Garrone are trusted figures in the industry, assisting builders since 1999 when the financial requirements were first introduced. We work with accountants and business owners to assist them in getting this right.
This publication is © Mage Advisory and is for general guidance only. Legal and financial advice should be sought before taking action in relation to any specific issues.