There was a collective sigh of relief among licensees and their accountants as the 31 December deadline for the new Annual Financial Reporting rolled by. But if you were one of the tens of thousands of licensees across Queensland who did not meet the minimum financial requirements for licensing, or who have not yet lodged your report. What now?
It was some comfort when the QBCC announced that they were giving licensees 12 months to get their financial health in order, however, as is always the case, there is a catch.
For SC1, SC2 and Category 1-3 licensees, the QBCC’s view is that those businesses “have less potential to cause catastrophic harm to the industry through financial failure” . For this reason these licensees, who do not comply with the MFR Regulation, “the QBCC will take an educative approach, provided the licensee is responsive to reasonable requests from the QBCC and does not have unpaid debts to subcontractors or other serious breaches of law” .
While not written in the regulatory guide, discussions with the QBCC have revealed, that if the licensee has breached their Maximum Allowable Turnover, then they will also not be eligible for the 12 month grace period.
The QBCC will take a more strict regulatory approach for licensees in categories 4-7 as they “are considered to have the potential to cause greater harm to the industry should financial failure occur due to their size and likelihood of working on larger projects with more subcontractors” .
What if you didn’t submit by the due date?
If you didn’t submit your annual financial report by 31 December 2019, the QBCC advises that you must still provide your annual financial information as soon as possible via the myQBCC portal.
If licensees in these categories (SC1, SC2 and Category 1-3) fail to provide any financial information pursuant to the MFR Regulation by the annual reporting day, the QBCC will generally adopt the following cascading actions, in order:
- The QBCC will make at least two attempts to contact the licensee after the annual reporting day has passed. Such contact may include telephone or email;
- The QBCC will notify the licensee of a proposed condition on its licence2 that no new contracts can be entered into until annual reporting is lodged3. However, such notification will not be given prior to 1 April 2020;
- The QBCC will impose the licence condition and give notice to show cause why the licence should not be suspended
- The licence will be suspended and a notice to show cause why the licence should not be cancelled will be given
- The licence will be cancelled .
So What Happens Now?
For the 2019 annual reporting day SC1, SC2 and category 1 to 3 licensees will be given 12 months, until 31 December 2020, to strengthen their businesses and meet the Minimum Financial Requirements (MFR) .
It is now half way through February. That leaves 10½ months for licensees to ensure they meet the requirements for licensing, or face suspension of their license. In reality though, as the reporting date is as at 30 June 2020, we suggest that licensees should be looking to have their position improving by the 30 June reporting date.
For licensees, it will be important to ask themselves some questions:
- Firstly, do you know if you fell short of the financial requirements?
- If so, do you know which requirements (Current Ratio and Net Tangible Assets) need to be improved & how to improve them?
- Then, what steps are you taking now to ensure you meet the requirements of your license category to support your Allowable Annual Turnover?
This can be very daunting for many licensees, so it is important for licensees to be working with their accountant as soon as possible to give themselves the maximum time to improve their financial position.
If you would like to discuss your financial position and compliance with the MFR, GTC Financial would love to help. Contact our office on 0749725177 to arrange a consultation.
Queensland Building and Construction Commission, "Minimum Financial Requirements (Annual Reporting) Regulatory Guide," 23 December 2019. [Online].