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Uncovered: Queensland Building and Construction Commission

Article By Adam Hurwood | | Accounting & Tax
It’s been over a year now since the Queensland State Government restructured the building and construction authority. The Government scrapped the existing Queensland Building and Construction Authority (QBSA) and replaced it with the newly formed Queensland Building and Construction Commission (QBCC). The newly formed QBCC then made changes to relax the financial reporting requirements to the authority. The relaxation of these rules does come at a price: the changes now allow the QBCC more power to conduct audit activity and apply hefty penalties to licence holders found to breach the licence conditions, including failure to comply with the financial requirements. In fact, licence holders found to provide false information to the QBCC face a 2 year prison sentence, so it pays to get it right.

Under the previous rules, contractors with a turnover of more than $300,000 were required to engage an accountant to provide an annual report to the QBSA on the financial viability of the business. Businesses with an annual turnover of less than $300,000 were able to self-assess their financial viability. This threshold has now increased to $600,000, so businesses that were previously required to engage an accountant may no longer be required to do so.

To be financially viable, the business must firstly have ‘Net Tangible Assets’ in excess of the prescribed amount for the applicable annual turnover range. If the business has insufficient net assets for the turnover range, then the directors are required to provide a Deed of Covenant and Assurance which provided a personal guarantee to the business. If the directors require a deed of covenant and assurance, then the directors personal assets and liabilities must also be verified.

In addition to the ‘Net Tangible Assets’ requirements, the business is required to have enough current assets to cover its current liabilities. Businesses that either have negative Net Tangible Assets or fail to have sufficient current assets to cover current liabilities will not be eligible to hold a QBCC licence.

The new rules also require the licensee to provide a report to the QBCC (in addition to the annual report) if their financial circumstances change during the year. The requirements of the licensee are to prepare quarterly internal management accounts, and use these to monitor the business’ financial position at least quarterly to ensure that they satisfy the financial requirements. The licensee will have 30 days from the end of the quarter to report any changes of the financial position to the QBCC.

As part of the financial requirements the business must pay its debts within normal trading terms. During the quarterly review the licensee must review the creditor and debtor listing to ensure that payments are within normal trading terms.

A summary of the instances when a licence holder must now report to the QBCC are as follows:
– New licences
– Decrease to the Net Tangible Asset position
– No longer satisfy the financial requirements
– Apply to increase allowable annual turnover
– Changes to the amount guaranteed by the directors in accordance with the deed of covenant and assurance

We have recently seen an increase in QBCC audit activity. Once an audit notice is issued by the QBCC, you will have only 21 days to provide all relevant information. Hence, it is important that you maintain accurate and up-to-date management accounts. Failure to comply with the QBCC audit requirements may result in licence suspension or cancellation, which can result in a significant interruption to your business.

If you do not believe your current accounting system is sufficient to allow regular reviews and to provide detailed information within short timeframes where required, we recommend you contact your Altitude Accountant to review your accounting system. Your accountant can provide advice and guidance where systems and processes may need to change, to ensure your accounting system is appropriate for you and enables you to review and provide information to the QBCC within the required timeframes. This proactive approach will ensure you fully comply with the QBCC financial requirements, and minimise stress should an audit be conducted by the QBCC.