Warning! At the outset of this module, we want to again stress that “Annual Reporting” requirements under the MFR are very different to other MFR reporting requirements.
Lesson 2.1 Annual Reporting requirements under MFR
According to information contained in a QBCC Guide to Annual Reporting – December 2019:
“Annual Reporting information does not need to have any accounting standards applied, does not need to be prepared by an accountant, and can be based on your most recent reporting or financial year information. The information provided can be based on your own internal management accounts.”
Lesson 2.2. Other reporting requirements under the MFR
In the same QBCC document, it is stated that other MFR reporting must:
- “be signed off by an accountant and be accompanied by signed financial statements;
- have the relevant accounting standards applied;
- not rely on accounts more than four months old from the end of the financial reporting period being relied on, and at the date the accepted independent accountant signed the report;
- not contain negative dollar value in assets;
- for an application or change of your maximum revenue, not be signed more than 30 days before we receive it.”
is the grouping of similar goods or services with common demand drivers and a similar supply base. 3 contractors have a maximum revenue range of $12,000,001 – $30,000,000, require Net Tangible Assets between $480,001 – $1,200,000 and must provide an MFR Report and signed financial statements.
is the grouping of similar goods or services with common demand drivers and a similar supply base. 4 contractors have a maximum revenue range of $30,000,001 – $60,000,000, require Net Tangible Assets between 1,200,001 – $2,400,000 and must provide an MFR Report and signed financial statements.
is the grouping of similar goods or services with common demand drivers and a similar supply base. 5 contractors have a maximum revenue range of $60,000,001 – $120,000,000, require Net tangible Assets between $2,400,001 – $4,800,000 and must provide an MFR Report and signed financial statements.
is the grouping of similar goods or services with common demand drivers and a similar supply base. 6 contractors have a maximum revenue range of $120,000,001- $240,000,000, require Net Tangible Assets between 4,800,001 – 14,400,000 and must provide an MFR Report and signed financial statements.
is the grouping of similar goods or services with common demand drivers and a similar supply base. 7 contractors have a maximum entitlement >$240M, require Net Tangible Assets >$14.4M and must provide an MFR Report and signed financial statements.
Lesson 2.3 Lessons Learned
Lesson Learned one
You should always strive to meet Annual Reporting obligations by the due date. However, if it is apparent that you will be unable to do so, then you should contact the QBCC prior to the passing of the reporting deadline and seek an extension of time to provide the information. In matters of this nature, it is important to be transparent and upfront with the QBCC.
Lesson Learned two
However, if the QBCC has specified the provision of information under the MFR because of concerns they have about your ability to meet your debts as and when they fall due (this is different to Annual Reporting), then the QBCC will view any failure to provide the information by the date specified in a much more serious light.
Lesson Learned three
The QBCC will, if necessary, act decisively and take compliance action against non-compliant licensees to meet its stated objectives to protect subcontractors, suppliers, investors and homeowners from financial hardship. They will suspend or cancel the contractors’ licences for failing to meet the MFR.
The QBCC provides on its website information as to the contractors who have had their licences cancelled or suspended within the previous 14 days. A quick scroll down of this information will reveal those contractors who have failed to meet the MFR.
Lesson Learned four
You may have to explore and settle to the QBCC’s satisfaction financial restructuring actions in order to address significant MFR issues. This could involve changes to your businesses structure which might have taxation and estate planning implications for you and your family.
We strongly recommend that you inform affected family members of the issues and that they be aware of pros and cons of restructuring options. If you have different financial, accounting and legal professions assisting you in managing the business, then we suggest that they all be brought into the picture and fully informed of the issues.
Lesson Learned five
The QBCC may monitor the operations of contractors after any MFR issue(s) are addressed. This means that you may be required to provide specified financial information like aged creditors and cashflow statements.
It is vital that your businesses accounting software system produces reliable and accurate information. Furthermore, you must meet the specified deadlines for the provision of information.
By way of example, if you were to provide information to the QBCC that indicates that there is no money owing to creditors in the 90 days plus is the grouping of similar goods or services with common demand drivers and a similar supply base., but the QBCC receives information of a contrary nature and subsequently verifies this to be correct, then the QBCC will justifiably have reasonable grounds to have no faith in the reliability of all the information.
This may be enough for the QBCC to suspend or cancel your licence.
Lesson Learned six
The QBCC has the necessary powers, upgraded systems and sufficiently trained staff to effectively identify contractors who are potentially not meeting the MFR. This is in part achieved by the QBCC using data in a far more effective and strategic manner than was previously the case.
In an article entitled “Heads up Accountants – Don’t let Big Data act before you do!”, Michael Chesterman pointed out that ‘Big Data’ has the potential to significantly assist the QBCC to achieve its compliance objectives, which will include enforcement of the MFR. In this article, he stated:
“Big Data has the potential to supercharge the compliance and enforcement functions of the QBCC. When supporting licensed contractors in Queensland as accountants you should be mindful ‘Enormous Brother is Watching’ and this is the title of a previous article of mine.
In this article I identified that the QBCC had issued an Insights Driven Regulator-Strategy and Business Case Tender where it is stated:
“Through recent significant legislative reform the QBCC was given extended powers to enhance the integrity and probity of the building and construction industry. Consequently, this reform will rely heavily on data intelligence and analytics. A critical dependency to achieve the Government’s expectations for implementation of the new laws is the ability to be an “insights driven regulator”.
In the QBCC 2018/2019 Annual Report, the Commissioner stated:
“The QBCC’s use of data analysis and forensic accounting investigations continues to evolve and deliver positive results. The proof of concept of our data analysis-based Insights Driven Regulator project will help us to continue to enhance our ability to more accurately identify risks to our industry before they occur, and to positively affect the regulatory decisions we take.”
You have been warned!
Lesson Learned seven
Subcontractors who operate reasonable sized businesses will be treated in the same manner by the QBCC as builders with a similar profile.
Lesson Learned eight
The QBCC are more actively reviewing financial information supplied by contractors. The QBCC is resourced, ready, willing and able to dive in deep to the financial information provided. The QBCC are also willing to undertake its own investigations to test the viability of licence holders.
Lesson Learned nine
Take ownership of your fate. The QBCC are not there to tell you how to resolve your problems. While you should certainly consult with your accountant with a view to addressing any financial issues, it is not your accountant’s role to ensure you meet the QBCC requirements. It is your licence and you must take responsibility.
Lesson Learned ten
Implementation of the new Annual Reporting requirements under the MFR is proving challenging to contractors and the QBCC.
In a Helix Legal article entitled New annual reporting challenges for contractors and the QBCC, Michael Chesterman, stated:
“There is no doubt that contractors and the QBCC are facing considerable, different challenges in dealing with the reintroduction of annual reporting under the MFR.
It has been 5 years since contractors have been required to submit to the QBCC a report confirming they satisfy a financial criterion as an annual licence requirement. While licensees can submit the required information themselves, I strongly recommend that at a minimum, they have a conversation with their accountant about the financial position of the business prior to them doing so.
Likewise it has been 5 years since the QBCC has had the legislative responsibility of considering and processing annual financial information from thousands of licensees.”
The final lesson you should take away is that you should embrace the Annual Reporting requirements under the MFR and diligently apply yourself in making sure that the QBCC has no cause to do anything other than promptly process the report each year.