If you’re working within the Construction and Building Industry, you would know that there are certain reporting requirements that you need to submit to the Queensland Building and Construction Commission. However, what you might not know is that your Net Tangible Assets and Maximum Revenue amounts not only determine the types of reports that you will have to complete, but also your overall Licence Category. Plus, these numbers relate to each other, so a change in one will mean a change in the total of the other, and this could lead to you being in the incorrect Licence Category or being non-compliant for your reporting.
So, let’s get back to basics and investigate exactly what Net Tangible Assets and Maximum Revenue are.
Net Tangible Assets
Net Tangible Assets (NTAs) is the value of assets that a QBCC Licensee or Licence applicant has after liabilities and intangible assets are removed and is used, in part, to determine the Licensee’s Category.
In calculation form, the NTA looks like this:
NTA = Assets – Liabilities – Intangible Assets – Disallowed Assets
Let’s put some parameters around this calculation…
Assets, in this instance, refers to an item of value that is both legally and beneficially held by the entity which is holder, or to be holder of, the QBCC license. Assets can include items like cash, construction contact work in progress, debtors (if collectible), inventory, motor vehicles, real estate, tools of trade, just to name a few.
Liabilities refer to all debt or obligations which are owed by the licensee or applicant.
Intangible Assets refer to assets that are not physical in nature. For example, an intangible asset are items such as brand recognition and intellectual property, such as patents, trademarks and copyrights.
Disallowed Assets are assets that the QBCC has chosen to omit from the NTAs calculation and include assets such as boats, assets not assessed as collectible, collector items, person furniture, investments or shares in companies that are not publicly listed, trust assets, life or income protection.
If you notice that your NTA is dropping, we recommend seeing an accountant and assessing if you are in the correct Licence Category, to ensure that you remain compliant with the QBCC.
Maximum Revenue
Maximum Revenue (MR) as the name suggests, is the maximum amount of revenue that an entity can earn in total from all sources in a financial year and, like the NTAs, is used to determine the Category that a QBCC Licensee will fall into.
The MR is determined, in part, from the NTA amount and is worked off the Category allocations, with the exception of SC1 and SC2.
In calculation form, it appears to be an algebra formula from year 12 math (see below):
Maximum Revenue – { x (b – a)} + a.
To determine your maximum revenue though, there is a calculator on the QBCC website. So, as you can see, the MR uses the NTA as part of the equation for its overall number. This means that any changes to one may result in a change of category allocation, or an inability to remain compliant within the current category.
Also, if you are exceeding your MR allocation, we recommend having a chat with your accountant to ensure that you remain compliant and meet your Category requirements.
Not Sure if your Net Tangible Assets and Maximum Revenue Add Up?
Being unable to meet or exceeding your Category requirements means that you could risk losing your QBCC licence. Check if you’re compliant by organising a meeting with one of the QBCC experts at Walker Hill Chartered Accountants who will be able to make sure that you’re meeting your requirements, and help with an action plan if your numbers don’t quite add up.
