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16 January 2020
The 31 December deadline has been and gone and there are still almost 40,000 builders and subcontractors who haven’t provided their financial information to the QBCC. This figure is largely made up of SC1 and SC2 and Category 1 to 3 licensees.
If you are part of this group, there is no need for panic. The QBCC have agreed to a further 12 months to enable licensees to strengthen the financial health of their businesses in line with the new laws.
However, category 4 to 7 licensees who haven’t submitted their financial information won’t be granted the same leeway. If you haven’t submitted, you will be contacted in the next few weeks and if the information isn’t forthcoming, we expect the QBCC to take action and suspend licences.
Despite the leeway from the QBCC, we still have major concerns for the smaller businesses (SC1 and SC2 and Category 1 to 3 builders and subbies). The QBCC has provided assurances that they will work with licensees during 2020. However, the question remains: what happens at the end of this year to those who haven’t met the Minimum Financial Requirements?
We’re hearing from members that some of the new requirements are causing grief, particularly the requirement for SC2 licensees to have Net Tangible Assets (NTAs) to the value of $46,000. This causes an issue for the many contractors with a company licence who have their assets protected within a family trust. According to the MFR requirements, the licence holder (ABC Company Pty Ltd as trustee for the ABC Family trust) must meet the NTA test, not the trust. And where there are both an individual and company contractor licences, you must have NTAs for both licences. To make matters worse, SC 1 and 2 licensees are not able to use deeds of assurance or guarantees to meet their NTA requirements.
At the end of December only 41% of SC1 and 2 licensees had reported, leaving a significant part of the Queensland’s industry (around 35,000 licensees) at risk (this doesn’t include the 4,200 licensees in Categories 1 to 7 who hadn’t reported). Under the current rules, if these businesses don’t meet the MFR requirements (and given the issues we’ve outlined above, it’s likely many won’t) they are likely to have their licences suspended, if not cancelled – which would largely bring Queensland’s building industry to a grinding halt.
It begs the question, if so many businesses who are otherwise operating profitable and successful businesses simply can’t meet the requirements on paper, what is the benefit of the Minimum Financial Requirements, particularly for the smaller end of the industry?