In the licensing landscape, it is crucial to stay ahead of regulatory changes that may impact your operations. Recently, significant developments have occurred in the realm of Minimum Financial Requirements (MFR) reporting within the Queensland building and construction sector, prompting us to provide guidance on how to navigate these changes effectively.
Since 1 July 2021, modifications to the Australian Accounting Standards (AAS) have eliminated the ability to provide Special Purpose Financial Statements (SPFS) to fulfill specific reporting obligations, including those related to MFR reports. Consequently, licensees subject to reporting requirements to the Queensland Building and Construction Commission (QBCC) were required to include General Purpose Financial Statements within their MFR reports. These MFR obligations applied to all QBCC licensed contractors.
On Friday, 16 February 2024, in response to concerns regarding cost implications and administrative burdens associated with these changes, the Department of Housing, Local Government, Planning, and Public Works introduced an amendment to the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (MFR Regulation). This amendment, whilst somewhat delayed in its progression to this point, aims to alleviate some of the financial pressures and streamline reporting procedures for certain licensees.
Under the amendment, QBCC contractors falling within financial categories SC1, SC2, and 1 to 3 are permitted to prepare MFR reports in alignment with the previous SPFS requirements for the accounting period ending 31 December 2023 onwards. This adjustment represents a significant relief for eligible contractors, potentially reducing the complexity and costs associated with compliance.
This change does not affect the annual reporting requirements for SC1 and SC2 (a 3 page form to be completed, with no supporting documents required) or for categories 1-3 (annual reporting form and internal management accounts required). Further, there are no changes to the existing requirements for licensees in financial categories 4 to 7 – for both MFR Reports and annual reporting purposes, these licensees are required to provide General Purpose Financial Statements.
What this means for your building business
While this amendment is a welcome development for many stakeholders, it’s essential to recognise that there is still a requirement to adhere to Australian Accounting Standard AASB 101, 107, 108 and 1048 .
Even under the special purpose reporting framework, other accounting standards may still apply in relation to the licensee’s financial position but the amendment requires that these standards need only be complied with to the extent that the licensee meets the recognition and measurement requirements under that other Standard.
The Standards most significant to QBCC licensees are AASB 15 Revenue standard dealing with WIP, AASB 16 Leases and AASB 112 Income Taxes dealing with Deferred Tax Assets and Deferred Tax Liabilities. So whilst SPFS require fewer disclosures, the balance sheet will require the same level of accounting. The only way to ensure your Net Tangible Assets and Current Ratio are met is to apply the same Accounting Standards as you would in preparing an MFR Report.
Consequently, we recommend considering outsourcing certain aspects of MFR reporting production to specialised professionals or firms well-versed in these standards. The QBCC now has a function available via the myQBCC portal that allows nominated representatives such as accountants to view and manage annual reporting lodgements for multiple licensees so when briefing your accountant you can authorise them to act as your representative and they will not need to log in to each separate licensee that they represent in order to manage your lodgement.
While the proposed amendment to MFR reporting regulations offers some relief for certain QBCC contractors, it’s essential that building businesses remain vigilant and ensure continued adherence to relevant accounting standards. By staying informed and seeking expert advice when needed, you can navigate these changes with confidence and mitigate any associated risks effectively. As always, we are here to provide support and guidance every step of the way.
If you need advice on how best to approach and structure your construction business when relocating to Queensland, contact Laura King at email@example.com.Not intended as legal advice. Read full disclaimer.