QBCC minimum financial requirements, explained

How the categories work

Licence categories run from the smallest (self-certifying) through the numbered categories as revenue grows. Each has a maximum revenue and a minimum NTA, roughly proportional — as a rule of thumb, the higher your allowable revenue, the more real capital QBCC expects you to hold behind it.

Two obligations often forgotten: you must notify QBCC when your NTA decreases by more than the allowed percentage, and you must report if your revenue is going to exceed your category's maximum. Waiting for the annual report date isn't compliance.

What counts as net tangible assets

NTA is total assets less total liabilities, excluding intangible assets — goodwill, formation costs, capitalised borrowing costs, and, critically, some related-party balances. The items that most often disqualify builders:

• Director and shareholder loans owed to the company — frequently excluded or heavily discounted unless properly documented and supported by the director's capacity to repay.
• Loans to related entities — the family trust, the property company — treated similarly.
• Goodwill from a business purchase, and other intangibles.
• Assets not genuinely owned — leased vehicles or equipment recorded as assets without the corresponding liability.
• Overstated work in progress or unsubstantiated receivables.

A company can look profitable and still fail MFR because the profits are sitting in a director's loan account rather than in the company.

The current ratio

Current assets divided by current liabilities must be at least 1:1. Builders commonly fail this while trading well, because progress claims, retentions and subcontractor payables land in different periods. Retentions receivable beyond twelve months aren't current assets; the ATO payment arrangement you're servicing is a current liability. Both push the ratio the wrong way.

Getting and staying compliant

Practical levers, in rough order of how often they work:

• Convert director loans into equity or properly document them with supporting evidence of capacity.
• Retain profits in the licensed entity rather than distributing everything out each year.
• Reclassify debt — refinance short-term facilities to longer terms so they stop being current liabilities.
• Deed of covenant and assurance from a related entity, where the structure supports it.
• Review the category — if revenue has grown, apply to move up before you exceed the maximum rather than after.

We prepare MFR reports and, more usefully, monitor the position through the year so the problem surfaces in February rather than at licence renewal. See our accountants for builders page for how that fits with job costing and WIP.

Frequently asked questions