Builders attempting to pass off “big boy toys” as assets will be knocked back by Queensland’s construction watchdog under new financial legislation.
Dirt bikes, racehorses and jet skis can no longer be used to prop up the balance sheet.
The Queensland Building and Construction Commission has continued its clampdown on errant builders, introducing minimum asset thresholds to protect security of payments in the industry.
The financial requirement thresholds, which have tripped up multi-national building giants, requires builders to hold minimum net tangible assets before they can exceed revenue limits.
“This means that a licensee needs to be financially stable and secure to take on more work and complete the customer’s job,” QBCC commissioner Brett Bassett said.
Bassett said that under the previous regulatory regime, builders were using personal assets to meet minimum asset thresholds.
“It might seem obvious, but it is important to stress that these new laws enable QBCC to ensure legitimate assets only are considered as part of a licensee’s ability to meet minimum financial requirements.”
The minimum financial requirement legislation is one of five new laws introduced by the regulator.
The measures were prompted in part by a swathe of construction industry insolvencies across the state that left close to 7,000 subcontractors $500 million out of pocket.
Earlier this month, the regulator issued 18 urgent show-cause notices for companies operating with “inadequate financial assets”.
The QBCC said the builders will need to demonstrate that they can improve their financial health within 21 days or risk having their licence revoked.
For builders with an annual revenue of more than $30 million, the first deadline for the new reporting reforms expired last month.
And more than 100 builders failed to meet the 31 March deadline, the QBCC revealed.
The regulator has now given the companies until 26 April to lodge their reports or face the prospect of licence suspension.
Bassett said it was unclear why the licensees had failed to provide the reports.
“We’re not asking them to reinvent the wheel — all they have to do is send us their financial reports from the last financial year.”
“We’ll do whatever we can to protect the industry from the devastating effects of insolvencies, because those impacts flow right through the building supply chain.”
Along with minimum financial requirements changes, the Queensland government has created a building industry taskforce to expose illegal or fraudulent activity in the industry.
In addition to the minimum financial requirements, the QBCC has introduced payment provisions for subcontractors, retention amounts with an automatic 12 month defects liability period and project bank accounts to safeguard progress payments. The QBCC has also introduced quicker access to adjudication for disputed invoices.
The building and construction industry is Queensland’s third largest employer.