Structuring Your Business for QBCC

Why structure matters twice as much in Queensland

Everywhere in Australia, your business structure decides your tax rate, your Division 7A exposure and what a creditor can reach if a job goes bad. In Queensland it decides one more thing: whether you can hold a contractor licence at the size you want to operate. QBCC’s Minimum Financial Requirements are tested against the licensee entity’s balance sheet – its Net Tangible Assets, its current ratio, its revenue. Put the licence in the wrong entity, or load the licensee with the wrong assets, and you can be profitable, solvent and still failing the tests that keep you allowed to work.

That is why we never design a builder’s structure for tax alone. Every structure we put forward is checked against three questions: what does the ATO see, what does QBCC see, and what does a creditor see? The right answer passes all three.

Why we discourage trusts for licensees

Discretionary trusts are the default recommendation in a lot of accounting firms – flexible distributions, family tax planning, a layer of asset protection. For an ordinary business, fair enough. For a QBCC licensee, we generally advise against holding the licence in a trust, and we are upfront about why:

• QBCC takes a dim view of them. The MFR framework is built around clean, testable balance sheets. Trust structures complicate everything QBCC wants to verify – who actually owns the assets, what the trustee’s own position is, and what happens to “the business’s” wealth when the trust resolves to distribute it.
• Trusts leak NTA by design. A discretionary trust typically distributes its profit every year – that is the whole tax point of it. But distributed profit is profit that never accumulates as retained earnings, which means the licensee never builds the Net Tangible Assets that growth into higher categories requires. We see trust-held licensees stuck at the same category for years because the structure quietly strips out the capital every 30 June.
• Unpaid present entitlements are a double problem. Profits “distributed” on paper but left in the business sit as liabilities owed to beneficiaries – dragging down NTA and the current ratio – and the ATO’s treatment of unpaid entitlements has only tightened. The 2026 Budget changes moved the goalposts again, and not in trusts’ favour.
• The flexibility cuts both ways. The discretionary power that makes trusts attractive for tax makes QBCC cautious about relying on trust assets to back a licence – the assets can be resettled away from the very entity the regulator is assessing.

Our usual pattern instead: the licence sits in a company that retains real capital and keeps a deliberately boring balance sheet. Family tax planning and passive asset protection can still happen – in other entities, away from the licensee. You do not have to choose between tax efficiency and a healthy licence; you just have to stop asking one entity to do both jobs.

The goodwill problem – and the two-company answer

Here is a trap that catches growing builders constantly. You buy a competitor or an established business for $500,000, and $300,000 of the price is goodwill – the name, the client list, the pipeline. Commercially that may be a perfectly good deal. But goodwill is a disallowed asset: the day the purchase settles, $300,000 of your equity stops counting toward your Net Tangible Assets. Your licence position can go from comfortable to failing in a single transaction – one that made the business stronger.

One structure we use to deal with this: separate the purchaser from the licensee. A purchasing entity buys the business and holds the goodwill, the brand and the client relationships. The QBCC licence sits in a different, clean company – real capital, no intangibles, a balance sheet built to pass the MFR tests. The trading entity then engages the licensee company to carry out the building work under proper intercompany arrangements, so all licensed work is performed by the licensed entity.

Done properly, each company does the one job it is good at: the purchaser carries the intangibles and the commercial relationships; the licensee carries the licence and the capital that backs it. Done casually, the same idea creates licensing breaches, payroll tax grouping surprises and intercompany loans that fail the disallowed-assets test – which is why this is a designed structure with proper agreements behind it, not a couple of company registrations and a handshake.

How a Deed of Covenant and Assurance works

Sometimes the licensee entity simply does not hold enough NTA on its own – but someone connected to it does. A Deed of Covenant and Assurance is QBCC’s mechanism for that: a covenantor (commonly a director, or a related entity with real assets) formally covenants to provide financial support to the licensee, allowing part of the licensee’s NTA requirement to be met by the covenantor’s capacity rather than the licensee’s own balance sheet.

The important things to understand before relying on one:

• It is a real, enforceable obligation – not a comfort letter. The covenantor is putting their own assets behind the licensee’s compliance, and they should get advice before signing one.
• QBCC caps how far it can take you. A deed can only cover part of the required NTA, with limits that depend on your financial category – and it is not available at every category. It is a supplement to real capital, not a substitute for it.
• The covenantor has to prove capacity – which is where the Statement of Financial Position comes in (below). A covenantor whose own wealth is goodwill, related-party loans and a leveraged house does not add much assurance, and QBCC assesses accordingly.
• It needs maintaining. If the covenantor’s position deteriorates, the support the deed represents deteriorates with it – this is a structure to review annually, not file and forget.

Used well, a deed is a legitimate bridge – for example, supporting a category step-up while retained profits catch up to the new NTA requirement. Used as a permanent crutch, it usually signals that the structure underneath needs the rework this page is about.

The Statement of Financial Position – and how QBCC reads your debtors

A Statement of Financial Position (SOFP) is, at its core, a declared balance sheet: assets and liabilities at a date, signed as true. In the QBCC world it appears in two places. A covenantor supporting a deed provides one to demonstrate they actually have the net real assets their covenant promises. And licensees themselves are assessed on the same logic whenever QBCC reviews their position: not “what does the balance sheet say?” but “what is genuinely there?”

Debtors deserve special attention in that reading, because for most builders they are the biggest current asset – and they carry your current ratio (the $1-of-current-assets-per-$1-of-current-liabilities test). QBCC looks at debtors through an aged debtors report, and the questions are predictable:

• How old are they? A debtor ledger full of 90-day-plus balances says collection problems – and balances QBCC doubts are collectable do not help your position. Genuinely dead debts should be written off, not carried to flatter the numbers.
• Who owes them? Amounts owed by directors and related entities are not trade debtors and get the disallowed-asset treatment.
• Do they reconcile? The aged debtors report, the balance sheet and your BAS lodgements need to tell the same story. Discrepancies invite exactly the scrutiny you want to avoid.

The practical takeaway: your debtor book is not just a collections issue, it is a licensing asset. Tight invoicing, honest write-offs and clean ageing keep both your cashflow and your QBCC position healthy – one more place where good bookkeeping quietly is the compliance strategy.

Structuring FAQs

My licence is already in a trust. Do I have to restructure?

Not necessarily, and not overnight. Restructuring has real costs – potential duty, CGT events, a new licence and MFR report for a new entity – so the answer is a weighing exercise: what the trust is costing you in NTA, flexibility and QBCC friction versus what the move costs. We map both sides before recommending anything.

Can I just move assets into the licensee company before reporting time?

Capital support has to be genuine and documented – cash or allowable assets, with a clean paper trail, in place at the balance date. Window-dressing that reverses in July is the kind of thing QBCC’s data-matching exists to find.

Does the two-company structure cost more to run?

Yes – two sets of accounts, intercompany agreements, and care around payroll tax grouping. For a builder carrying significant goodwill or acquisition plans, the licensing and asset-protection benefits usually outweigh the running costs comfortably. For a small subbie, it is usually overkill – and we will say so.

Who should sign as covenantor on a deed?

Someone with genuine, demonstrable net assets and a full understanding that they are legally committing them. That is a personal-advice conversation every time – including, sometimes, advising the would-be covenantor not to sign.