It’s important for accountants and business advisors to be up to date on reporting requirements for their clients operating in the building and construction industry in Queensland.
In Queensland, minimum financial requirements were updated on 1 October 2014, prior to this businesses with income above the self-certification limit where required to have their financial statements independently reviewed at licence renewal time.
Under the new policy the self-cert turnover limit has doubled to $600,000 and the requirement to have financial data reviewed independently was removed, effectively allowing those in the industry to tick a box to confirm compliance with the minimum financial requirements.
Under the old regime we conducted annual reviews for a significant number of licensees, it is fair to say that for a good proportion of these clients the financial requirements for licensing were at best not at the forefront of their minds and in some cases not really understood.
The QBCC are willing to work with clients who have compliance issues but the best way to keep out of trouble and avoid the risk of clients losing their licence is to be aware of the requirements, outlined below is a brief summary:
- A licensee must not exceed their maximum revenue by more than 10%
This maximum revenue figure will be that which was last reported on by an independent reviewer or an amount declared for those under the self-cert turnover limits. If a licensee believes they will exceed their historic maximum revenue by more than 10% they must provide a new MFR report to the QBCC or risk a licence suspension or other disciplinary action & penalties.
- The licensee must have a current ratio or at least 1:1
This must be the case at all times a licence is held. Current assets MUST exceed current liabilities. Problematic areas we sometimes come across relate to the failure to book tax provisions, hire purchase liabilities not being split correctly & lack of justification for unpaid trust distributions being treated as non-current liabilities.
- Net Tangible Assets (NTA) must be greater than zero and sufficient for a licensees maximum revenue
If the licensee has insufficient NTA in their own right (a corporate licensee & trading trust for instance) they may rely on a deed of covenant and assurance to reach the required NTA. If NTA last reported falls by 30%, the QBCC need to be notified within 30 days & a new declaration or MFR provided. Failure to do so is a licence breach.
- Deed of Covenant and Assurance
The deed is an original document that gets lodged with the QBCC. The amount that a covenantor could be called upon to pay by a liquidator or trustee in bankruptcy is the amount specified on the most recently submitted MFR report. Those relying on a deed must submit an independently verified statement of financial position.
- Requirement for Management Accounts & Other Matters
All licensees must prepare internal management accounts at quarterly intervals. QBCC states that these must include at least a P&L, balance sheet, aged listings of trade debtors and creditors and a statement of cash flows. Management accounts may be requested by the QBCC & failure to comply would be deemed a breach.
When submitting an MFR report, financial statements must also be submitted. We have submitted financial statements without a statement of cash flows without adverse consequences so it appears there may be some flexibility.
Any company required to lodge audited or reviewed financial statements with ASIC must also lodge those statements with the QBCC.
For more information on the key elements of the QBCC Minimum Financial Requirements click here .
To arrange a MFR report, contact James Kenward at SAAS Audit or email
