As a QBCC (Queensland Building and Construction Commission) license holder, understanding the concept of tangible assets and how they impact your ability to meet financial requirements is crucial to maintaining your license and ensuring your businessās financial stability. This article, written by Senior Manager Jack Green, will cover what tangible assets are and explore options for business owners who may face challenges with insufficient Net Tangible Assets (NTA).
What is a Tangible Asset?
Tangible assets refer to physical items of value that a business owns. These assets are used in business operations, and they are typically long-term investments that can be sold or used as collateral. Examples of tangible assets include:
- Property (e.g., land, buildings)
- Vehicles (e.g., trucks, cars)
- Machinery and Equipment (e.g., cranes, bulldozers, power tools)
- Inventory (e.g., materials or supplies that can be sold or used in construction)
- WIP (e.g. unbilled construction work)
- Cash and Cash Equivalents (e.g., money in hand or in a business account)
These assets are important for your business’s financial health because they represent the value of what your business owns and can liquidate if necessary. The QBCC uses the concept of Net Tangible Assets (NTA) to assess whether a business has sufficient financial capacity to operate within the construction industry.
What are Net Tangible Assets (NTA)?
Net Tangible Assets (NTA) refers to the total value of a business’s tangible assets minus any liabilities (debts or obligations) that the business owes. The NTA figure is important for ensuring that your company has the resources and financial stability to meet its obligations, particularly in case of a claim or dispute. For QBCC license holders, meeting a minimum NTA threshold is essential for maintaining your license.
The QBCC will require a minimum NTA amount to be held, depending on the size of your business and the level of risk involved in your construction activities. If your business has insufficient NTA, the QBCC may deem it financially unstable, which could lead to a loss of your license or restrictions on your activities.
What are the NTA Requirements for Each Level of QBCC License Holder?
The QBCC sets specific Net Tangible Asset (NTA) requirements for different license categories, depending on your businessās turnover. Meeting these NTA requirements is crucial for maintaining your license and ensuring your business is financially stable. Below are the NTA requirements for each QBCC license category:
QBCC License Category | Annual Turnover Range | Minimum NTA |
Self-Certifying 1 | Up to $200,000 | $12,000 |
Self-Certifying 2 | Up to $800,000 | $46,000 |
Category 1 | $800,001 to $3,000,000 | $46,001 |
Category 2 | $3,000,001 to $12,000,000 | $156,001 |
Category 3 | $12,000,001 to $30,000,000 | $480,001 |
Category 4 | $30,000,001 to $60,000,000 | $1,200,001 |
Category 5 | $60,000,001 to $120,000,000 | $2,400,001 |
Category 6 | $120,000,000 to $240,000,000 | $4,800,001 |
Category 7 | Over $240,000,001 | $14,000,001 |
If your business falls short of the required NTA for your license category, it could put your ability to maintain the license at risk. In such cases, it’s critical to consult with a professional who understands the financial requirements of the construction industry, such as a construction accountant or specialist. Walsh Accountants has a dedicated Property and Construction team with expertise in managing these financial metrics and can assist in strengthening your balance sheet to meet these requirements.
What Can I Do if I Have Insufficient Net Tangible Assets?
If you find that your business has insufficient Net Tangible Assets, there are several strategies you can explore to address the shortfall and meet the QBCC’s requirements. Below are some steps you can take:
Re-evaluate Your Assets and Liabilities
Start by reviewing your tangible assets and liabilities to ensure that your financial statements are accurate. You may discover assets that have been underreported or liabilities that have been overestimated. Make sure all your tangible assets, including work in progress and equipment, are properly valued and included.
Increase Your Tangible Assets
To increase your NTA, you might need to acquire additional tangible assets. This could involve:
- Purchasing new equipment or vehicles for your business
- Acquiring property or land that holds value
- Building or renovating your business premises
- Issue additional share capital
- Allowing retained profits to accrue
Investing in more tangible assets can improve your overall NTA, but make sure you weigh the costs against the potential benefits to ensure the decision aligns with your long-term business goals.
Reduce Liabilities
Reducing liabilities is another way to improve your NTA. Consider strategies to pay down existing debts or renegotiate terms with creditors. Reducing high-interest liabilities or eliminating loans can free up more resources and improve your balance sheet.
Obtain a deed of covenant and assurance
If increasing your tangible assets or reducing liabilities is not feasible, another option is to provide a deed of covenant and assurance. A separate entity, such as a director of the licensee or related body corporate of the licensee, may be willing to back your business by offering this assurance. This can help to fulfill the QBCC’s financial requirements and improve your business’s NTA, but will require the separate entity to comply with additional reporting requirements.
Seek Expert Advice from Walsh Accountants' Property and Construction Team
If you’re unsure of how to address insufficient NTA, Walsh Accountants’ dedicated Property and Construction Team is here to help. Our experts specialise in the unique financial needs of the property and construction industries. We can assist you in reviewing your financials, offering tailored advice on strengthening your balance sheet, and recommending strategies to ensure you meet the QBCC’s requirements. One area where QBCC license holders often come unstuck is by not being aware of how their WIP is performing relative to their budgeted figures. If this is something that you struggle with in your business, our team are here to assist.
Our Property and Construction Team includes Senior Manager Jack Green, Assistant Manager Michael Maykin and Accountant Eric New.
Jack, Michael and Eric have extensive experience working with businesses in the property and construction sector and they are committed to helping you navigate these challenges and secure the financial stability your business needs. If you are concerned about how your Net Tangible Assets might impact your business activities, reach out to our team today to schedule a consultation with a member of our Property and Construction Team.
If you are an existing client with Walsh Accountants, feel free to discuss any of the issues raised in this article directly with your accountant. If you are a new client, feel free to reach out to arrange a complimentary discussion with our Property and Construction team by lodging a request using this form.
Article by Jack Green
Jack Green ā Senior Manager
Jack has worked with a wide range of high-net-worth clients and businesses with turnovers exceeding $40 million. Jack specialises in construction, agriculture, manufacturing, health and high net worth individuals.
Jack has advised clients in relation to bespoke tax pieces around international tax, provided ongoing business advisory support, completed numerous valuations and accompanying restructuring advice pieces.
