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Building Licencing Changes On The Way

written by Darren Hagarty

8 August 2014 saw the new Queensland Building and Construction Commission Amendment Bill introduced into Parliament. When the Bill becomes law, there will be a number of impacts that effect the building and construction industry. The introduction of this legislation is a timely reminder of the need to closely understand the detailed provisions that apply to your business.

Reduced compliance burden

In relation to licencing provisions, the Bill reduces the compliance burden under the Act. Contractors can now elect to renew their licence every three years, instead of annually.

It should be noted however, that compliance with the reporting requirements regarding Net Tangible Asset levels and Annual Allowable Turnovers are unchanged. PT Partners will therefore continue to provide to you the ongoing monitoring and reporting services that relate to these financial ratios.

Increased audit powers

The Queensland Building and Construction Commission has been granted extended audit powers when investigating contractors in the construction industry. Previously, the Commission was limited to one audit every two years for an entity. There is now no such limit and the Commission can carry out an audit at any time.

The powers of the Commission in relation to requesting documents or information have also been significantly expanded and now also extend to requesting information from accountants directly. Crucially, the Commission can now take disciplinary action directly against contractors without first applying to the Queensland Civil and Administrative Tribunal.
Excluded individuals and companies

In relation to ‘excluded individuals’ and companies, the exclusion period has been reduced from five years to three.  Furthermore, only construction industry-related insolvencies are now treated as ‘relevant events’ triggering the exclusion provisions.  This will come as a relief to clients with other business interests or directorships outside the industry.

Deeds of Covenant and Assurance

Recent high-profile collapses in the building and construction industry have highlighted the risk associated for clients that enter into Deeds of Covenant and Assurance under the Financial Requirements for Licensing policy (FRLs). The Deed form states that all covenantors must take legal advice before signing a Deed of Covenant and Assurance. Many don’t, and the risks of signing such a document needs to be well understood.

Deeds are often thought of as essentially a guarantee, but in reality they are more akin to an unconditional performance bond. A liquidator may call upon a Deed to require immediate payment in full of the ‘defined amount’ under the Deed, without demonstrating any underlying debt or default, and sue to recover the money in court if the demand is not met. Where there are multiple covenantors, each is liable for the full amount specified in their Deed, and there is no requirement to apportion liability between them. As a matter of practicality, this may necessitate a side deed between covenantors, particularly where there are non-related parties to the Deed

Furthermore, because the Commission is a party to the Deed, they must also be party to any situation where the Deed needs to be revoked. By way of example, if a covenantor sells out of the business, it is crucial that they take steps to secure the revocation of the Deed.

Finally, it is important that our clients understand the role that we as accountants play in giving an ‘Independent Review Report’ under the FRLs (particularly where there is a Deed of Covenant to issue). In essence, these reports are basically akin to providing a statutory warranty to the Commission that as accountants, we have “conducted all reasonable checks into each Covenantor’s entire financial position to ensure they have Net Real Unencumbered Assets to cover the amount secured by the Deed.

PT Partners can not only assist you with your QBCC reporting obligations and where necessary Deeds of Covenants and Assurance, but in addition, we have strong referral relationships with a number of quality legal firms to assist you in understanding the issues that surround the Deed of Covenant and Assurance.

If you require further information in relation to this subject, please speak to your regular PT Partners advisor.


Kelvin Deer is a Director of PT Partners.


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