As part of the Queensland Government's building industry fairness reforms, new laws that strengthen the minimum financial requirements (MFR) for licensing commenced on 1 January 2019.
The Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) allows for the MFR to be prescribed in a regulation, which is a step towards making the provisions more transparent.
Why changes are needed
In 2014, the reporting requirements for licensees were reduced. However, since then, numerous high-profile insolvencies have demonstrated that the Queensland Building and Construction Commission (QBCC) must be able to:
- better monitor licensees' financial situations
- take appropriate action where a licensee may not be operating a financially sustainable business.
In September 2018, the QBCC released a discussion paper (PDF, 664KB) seeking feedback from industry and the community on the proposed new financial reporting laws.
These laws will benefit industry and the community by:
- providing more transparency
- enabling the QBCC to better detect and mitigate the impact of potential insolvencies and corporate collapses.
Time frame for changes
As a result of this consultation, changes to the requirements are happening in 2 phases:
Phase 1 began on 1 January 2019 through the new Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 and:
- re-introduced mandatory annual reporting for all contractor licensees
- required more stringent reporting of decreases in the assets of higher-risk licensees
- clarified how assets are treated.
Phase 2 will begin on 1 April 2019 and will introduce higher reporting standards for category 4–7 licensees (larger, higher risk licensees), along with the rest of the reforms.
This phase will also involve repealing the existing MFR Board Policy and placing its provisions in a regulation.
Summary of changes
Key changes in the Minimum Financial Requirements Framework (PDF, 173KB) include:
Stronger reporting requirements
Licensees will need to:
- provide financial information to the QBCC annually
- report significant decreases in net tangible assets (20% for categories 4–7; 30% for other licensees)
- provide additional and more detailed financial information (for higher revenue licensees).
Additionally, the upper revenue limit for self-certifying licensees will increase from $600,000 to $800,000.
Inclusions for calculating a licensee's assets and revenue
- Personal recreational and unregistered vehicles will no longer be used to meet minimum asset thresholds.
- Clarification about when money in project bank accounts can be classed as an asset or revenue.
Improved data quality and availability for the QBCC
- QBCC will better be able to get independent verification of an MFR report and recover costs.
- If an accountant makes 'material changes' to an MFR report, they'll need to clearly identify them and support with updated financial information.
- If a licensee relies on a deed of covenant and assurance, they'll need to give the QBCC detailed financial information about the covenantor to show they can honour their agreement.
- Similar requirements will be introduced for related entity loans, so the QBCC can assess whether these loans will be collectable.
Penalties for non-compliance
The enforcement framework is also being improved, including new penalties and offences for failing to comply with the requirements, such as failing to provide financial information annually. The new regulation outlines these penalties.
Existing penalties continue to apply. Under the BIF Act, the QBCC can place conditions on a licence, or take steps to suspend or cancel the licence.
Penalties also apply for providing false or misleading information, or refusing to supply financial information at the QBCC's request.
The enforcement provisions will be further strengthened as part of Phase 2, including executive officer liability and escalating penalties, to help motivate all parties involved in running a licensed company to meet the new MFR.
Read more information about financial requirements for licensees on the QBCC website.