Contractor / builder licensees are required to meet minimum financial requirements to obtain and continue to hold a QBCC license.
As a result of minimum financial reporting, the QBCC can assess whether licensees are exceeding their maximum revenues (‘MR’).
Maximum revenue – what is it?
Your MR is the greatest amount you can turn over you for your reporting year before needing to apply to the QBCC for an increase. It includes all revenue you receive from the building industry and any other source.
You may nominate a MR amount providing it is less then the calculated maximum revenue.
Be aware of your MR amount and monitor your finances to ensure you do not unwittingly exceed it.
Purpose
The premise behind MR is that you should have the financial capacity to manage the projects that you take on. Those that do not may result in insolvency which has an adverse impact on the industry.
How it is calculated
Your MR is determined by your net tangible assets (‘NTA’), as stated in the financial declaration or minimum financial report (‘MFR’) you are required to lodge with the QBCC.
If you provided a Deed of Covenant and Assurance, the assured amount will be added to your NTA to determine your MR.
The requirements
You can exceed your MR by up to 10% without first obtaining approval from the QBCC.
However, if you are going to exceed your MR by more than 10%, you must first apply to the QBCC. Your application will need to include a new financial declaration or MFR report that supports the increase. Importantly, you need to make this application before your revenue exceeds the maximum amount.
You should be regularly checking your financials to ensure you are not unwittingly exceeding your MR.
Failure to comply
The QBCC has power to suspend or cancel your license for failure to comply. If you receive a notice to suspend or cancel your license from the QBCC, you should seek advice immediately.
The consequences of a suspension or cancellation of your QBCC license can be dire for your business.
If you require legal advice about any matter raised in this article, please contact us on (07) 5458 6855 or email mklein@kleinlegal.com.au.