Minimum Financial Requirements for licencees
As part of the Queensland Government’s security of payment reforms, new laws that strengthen the Minimum Financial Requirements (MFR) for licensing have commenced.
In 2014, the financial reporting requirements for licensees were reduced. With numerous high-profile insolvencies in recent years, the QBCC needs to be able to more clearly monitor the financial situation of licensees and take appropriate action where a licensee may be operating a financially unsustainable business.
The Queensland Government released a discussion paper (PDF, 664KB) in September 2018 to seek feedback from industry and the community on proposed new financial reporting laws.
A new Minimum Financial Requirements Framework was released in November 2018 and outlined the MFR reforms.
The changes have been implemented in two stages.
Phase 1 began on 1 January 2019 and:
- re-introduced mandatory annual reporting for all licensees
- changed reporting decreases in Net Tangible Assets
- clarified how assets are to be treated.
Phase 2 began on 2 April 2019 and introduced higher reporting standards for category 4-7 licensees, along with the remainder of the reforms.
The key changes in the new Minimum Financial Requirements Framework (PDF, 176KB) include:
- Stronger reporting requirements
- Licensees need to:
- provide financial information to the QBCC annually.
- report significant decreases in Net Tangible Assets (20% for categories 4-7, 30% for other licensees).
- Higher revenue licensees are required to provide additional financial information.
- The threshold for self-certifying licensees has increased from $600,000 to $800,000.
- Licensees need to:
- More clarity about what can be included when calculating a licensee’s assets and revenue
- Personal recreational and unregistered vehicles can no longer be used to meet minimum asset thresholds.
- Clarity about when money in Project Bank Accounts can be classified as an asset or revenue.
- Improved data quality and availability for the QBCC
- The QBCC now has the ability to obtain independent verification of an MFR Report and to recover costs.
- Any ‘material changes’ made by an accountant to an MFR report need to be clearly identified and supported by updated financial information.
- If a licensee is relying on a Deed of Covenant and Assurance, they need to provide the QBCC with detailed financial information about the covenantor to show they can honour their agreement.
- Similar requirements apply to related entity loans so the QBCC can assess whether these loans are going to be collectable.
There is also an improved enforcement framework, including a range of new penalties and offences, for failing to comply with the requirements.
These new laws will benefit industry and the broader community by:
- providing greater transparency
- better equipping the QBCC to detect and mitigate the impact of potential insolvencies and corporate collapses.
If you have any questions, please email MFR@hpw.qld.gov.au.
- Last updated:
- 29 November 2019