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In Queensland, the minimum financial requirements (‘MFR’) framework exists to ensure a licensee’s business is financially sustainable and has the appropriate level of working capital.
The Queensland Building and Construction Commission (‘QBCC’) allows a licensee to exceed their allowable annual turnover (‘maximum revenue’) by no more than 10%. However, as a result of restrictions on trade availability and increases to the cost of supplying labour and materials, many licensees are exceeding this threshold and are unsure of their next steps.
Here are HIA’s top tips in relation to MFR reporting requirements:
If you think that you may exceed your maximum revenue by more than 10%, it is essential that you apply to QBCC to increase your threshold. Even if you may not meet the requirements of the next financial category (e.g., do not have enough net tangible assets), you must still apply to increase your maximum revenue so that you satisfy your legislative obligations under the Queensland Building and Construction Commission Act 1991.
If you think that you are going to go over your maximum revenue or wish to increase your threshold, you should apply to do this straight away and not wait until the reporting period. The financial reports done through MFR reporting can then be used for annual reporting, meaning a licensee must only go through the costs associated with having a qualified accountant prepare the reporting documents once.
If you have exceeded your maximum revenue, QBCC will want to know why this has happened. It is best practice to provide any evidence with your report and/or application that explains your situation (for example, significant price increases), or if you do not have the net tangible assets to support an increase to the next financial category, evidence of how you intend to bring your maximum revenue back down to within your threshold.
In addition to being good business practice to see an accountant more than once a year, you will need to demonstrate, at every financial category, that you have enough net tangible assets to support your allowable annual turnover. If you have gone over your threshold and don’t believe you will be able to bring it back down, you should talk to your accountant about how you can boost your assets to allow you to operate in a higher financial category. An accountant will have a good understanding of the type of assets that will be considered for MFR purposes.
QBCC become aware of a licensee’s position not only through MFR reporting but also through Home Warranty Insurance, previous annual reports, and so forth. Providing incorrect or inconsistent information will not only expose a licensee to risk, but can increase the chances of financial failure, liquidation, or bankruptcy – all risks that the MFR framework is designed to reduce. QBCC want to know the true and correct financial position of a licensee, so it is important to ensure that you are honest and meet your reporting obligations.
If you are concerned about exceeding your maximum revenue or would like to discuss minimum financial requirements in further detail, please contact our Workplace Advice team on 1300 650 620.
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