In the last few weeks, the QBCC has announced significant changes to the financial requirements for licensing commencing on 1 October 2014.
These are the most significant changes since the rules were introduced in the late 1990’s and the changes impact every licensee in the building and construction industry.
The most important aspect of these changes is putting the onus back on the licensee to ensure they are meeting the rules. For the most part licensees will no longer be required to supply a review or audit report at the time of licence renewal. In return, the QBCC will create a more robust monitoring regime to better identify licensees who are not meeting the financial requirements.
Your building license is the lifeblood of your business so it’s critical that you are aware of these changes and what they mean to you. Most importantly there are still financial requirements that must be adhered to [these have remained largely unchanged].
When do you need to provide a review or audit report to the QBCC?
As a general rule you now only need to provide a review or audit report where the following occurs:
1. Your net asset position drops by more than 30% (formerly 10%)
2. You want to increase your allowable turnover by more than 10%
3. You are applying for a license and are asking for an allowable turnover of over $600,000 (formerly $300,000)
It is now clear under the new rules that you need to actually engage in your own quarterly monitoring regime to ensure that you meet the net asset and current ratio tests. You must be able to show the QBCC appropriate management accounts and data that justifies this assessment (if requested).
Payment of debts
A new requirement is that you must pay your creditors as and when they fall due in order to maintain your licence. There are some exceptions but they are limited. For example, where a payment arrangement has been agreed with a creditor.
Deeds of assurance
Deeds are still allowed where a licensee cannot meet the net asset requirements in their own right. As with the prior requirements the net asset position provided under the deed still needs to be signed off by an accountant.
How will the QBCC monitor the new system now that it relies on self-reporting?
The QBCC will now undertake their own monitoring and compliance regime. One would expect that there will be more compliance audits than in the past. These audits maybe triggered by events such as booking up more QBCC insurance than your existing allowable turnover or complaints made about either late payments to contractors or defective work.
These updated requirements will take effect on 1 October 2014. You should ensure that where you hold a QBCC licence that you are abreast of these changes.
For more information, take a look at the QBCC resources below:
• Minimum financial requirements
• Minimum financial requirements [key messages]
• Financial requirements comparison table
This article was contributed to TheUrbanDeveloper.com by Michael Garrone of businessDEPOT