Insights
What are the most common QBCC annual lodgement mistakesIt goes without saying that 2019 has been an eventful year for the building industry. Add new QBCC financial reporting requirements, then throw in QBCC’s new big stick approach and the average licensee is bound to run into problems.
Now that we have had a number of licensees lodge their first round of financial data with the QBCC we can provide some insight into the mistakes we have seen. The more notable ones have been:
- Business structure isn’t future fit – We have now seen several businesses lodge data where it was doubtful they met the old financial requirements – let alone the new ones. Some structures can be notoriously difficult to meet the requirements. Some examples are trust structures and businesses that have related party loans and private investments. The QBCC is now looking at lodgements far more closely than in the past so you are unlikely to avoid detection.
- Mixing QBCC licensed turnover with turnover that doesn’t require a licence – Where businesses only do a small portion of their QBCC turnover in Queensland, it often makes sense to separate the business units into separate entities. This can greatly simplify QBCC annual reporting and ensures you only need net assets to meet your QBCC turnover. It also means that your core entity structuring considerations aren’t impacted on an ongoing basis by QBCC financial issues.
- Licensees and their advisors mistakenly believing that they were meeting the financial requirements – Once a problem has been identified the most important thing once a problem is identified is to resolve the issue as quickly as possible to avoid suspension. We have seen a number of cases where this wasn’t acted on promptly, nor further advice taken until suspension occurred.
- Including Related Party Loans as Assets! – We have already seen a number of cases where significant related party loan assets have been disallowed leaving licensees with negative equity under the QBCC requirements. This is one of those areas that has become far more difficult under the new regulations. In the past you only had to prove that the loan was repayable.
Now you need to show that the related entity additionally can meet the current ratio and has net assets based on the QBCC requirements. Get used to the term ‘Related Party Loan’, you’re going to be hearing far more about this during 2020.
- Not identifying all your ‘Disallowed Assets’ for QBCC purposes – There are a number of these that you need to pick up on and consider in assessing whether you meet the requirements. We have seen significant issues caused by intangibles, such as borrowing costs and goodwill, and investments in other companies and trusts, in addition to personal assets financed through the licensed entity.
- Not seeking professional advice by someone experienced in the new regulations – In our experience many advisors were never familiar with the older requirements, let alone the new ones. With the QBCC checking in detail, problems are far more easily detected.
The most important thing once a problem is identified is to resolve the issue as quickly as possible to avoid suspension.
With the QBCC now looking over our shoulder it’s important to understand your structure and the new QBCC regulations. We have assisted several businesses with their structures to ensure they remain future fit, contact us today for a health check on your business structure.
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