Victorian Builder Minimum Financial Requirements 2026: what‘s changing and how to prepare

Key points:

• New three-tier system based on Net Tangible Assets: Tier 1 ($1–$50k), Tier 2 ($50k–$1.5m), Tier 3 ($1.5m+)
• Revenue cap: Annual revenue cannot exceed 20× net tangible assets
• Mandatory quarterly reporting: Internal management accounts required every quarter
• Ongoing compliance triggers: Notify the Victorian Building Authority when your current ratio falls below 1 or NTA drops by 20-30%
• Transition dates: Compliance phased in between November 2027 (Tier 3) and July 2028 (Tier 1)

Why these regulations matter for Victorian builders

The Building Amendment (Minimum Financial Requirements) Regulations 2026 represent the most significant change to financial oversight in Victoria’s building industry in recent years. Released for consultation by the Victorian Government, these proposed regulations establish comprehensive financial standards for domestic builders, with the stated aim of protecting consumers and ensuring industry stability.

While the intent behind these reforms is clear, the practical implications for builders, particularly smaller operators, are substantial. This article outlines what’s changing, who’s affected, and where Pitcher Partners is advocating for more practical and proportionate requirements.

Core financial tests: What every builder must meet

Beyond the tier classifications, all domestic builders must satisfy three fundamental financial tests:

1. Solvency test

Builders must be able to pay debts as and when they fall due. Importantly, a debt is not considered “due” until any disputes or offsetting claims are legally resolved, providing some practical flexibility in genuine commercial disputes.

2. Current ratio ≥ 1

The regulations require builders to maintain a current ratio of at least 1.0 at all times, meaning:

Current assets ÷ Current liabilities ≥ 1

Unlike some requirements that apply only at reporting dates, this ratio must be maintained continuously, creating an ongoing monitoring obligation.

What to watch out for:

• Disallowed assets impact:
  • Loans receivable to related entities must have sufficient current assets to repay the loan in full, which could significantly impact your current ratio calculations.
  • Non-listed company shares or units in a unit trust are disallowed.
• Accounting standards compliance: All assets must be valued in accordance with all Australian Accounting Standards (AASBs), requiring full adoption of these standards.

3. Revenue cap

Once registered, builders face a significant operational constraint: annual revenue cannot exceed 20 times their net tangible assets. This cap is calculated from the most recent financial information provided to the Authority.

Example: A builder with $200,000 in net tangible assets would face a revenue cap of $4 million per year.

Builders must notify the Authority at least 7 business days before exceeding their revenue cap and lodge either:

• A financial declaration (if revenue < $1 million), or
• An MFR report (if revenue ≥ $1 million)

What counts as an asset (and what doesn’t)

The regulations take a conservative approach to what can be included in net tangible asset calculations. Disallowed assets are relevant for this test as well

What to watch out for:

• Guarantees can boost your NTA (Tier 2 or 3 only): Any guarantees provided to the home builder by individuals, trusts, or other companies can be included in your NTA calculation. This potentially allows you to greatly increase your NTA calculations if required, though these guarantees must be properly tracked.
• Accounting standards compliance: All assets must be valued in accordance with all Australian Accounting Standards (AASBs), requiring full adoption of these standards.
• Trust assets value discount: Trust asset values are discounted each year, and after four years they are valued at nil in the NTA calculation.

Ongoing notification obligations: When you must tell the Authority

Registered builders face continuous monitoring requirements and must notify the Victorian Building Authority within specified timeframes when, two key requirements are:

These notification requirements create significant administrative burden and require robust internal financial monitoring systems – particularly challenging for smaller builders without dedicated finance teams.

Things to watch out for:

• Reporting and disclosure:
  • Initial financial report: An initial financial report must be submitted to the Building & Plumbing Commission that is different from your standard financial reports. This will require your finance team or accountant to prepare a new report specifically for compliance purposes.
  • Qualified accountant requirement: Reports must be prepared by a qualified accountant and include a signed financial statement prepared in accordance with accounting standards. This cannot be an employee or related to the home builder.
  • General Purpose Financial Reporting: Reports are required to be prepared in accordance with Accounting Standards (AASB requirements), which means all Tier 2 and Tier 3 home builders will need to prepare General Purpose Financial Reports. This represents a higher cost to prepare, though the impact is minimal if the home builder is already a large company under the Corporations Act, that prepares and lodges Audited General Purpose Financial Reports with ASIC.
  • Increased disclosures: Enhanced disclosure requirements apply to aged debtors and creditors for Tier 2 and Tier 3 domestic builders.
• Internal management accounts:
  • Quarterly preparation mandatory: It is a prescribed condition of registration that domestic builders must prepare internal management accounts for each quarter of the reporting year.
  • Provision to Authority: Domestic builders must provide a copy of their internal management accounts to the Authority within 14 business days after receiving a written notice requesting them.
  • Accounting standards compliance: The internal management accounts must be prepared in accordance with accounting standards.

Transitional (“grace period”) arrangements

Recognising the significant impact these changes will have, the regulations include transitional arrangements for builders registered as at 30 June 2026. The new requirements will be phased in:

This phased approach provides some breathing room, but builders should begin preparing now rather than waiting for their compliance date. 

Practical steps: What builders should do now

Whether you’re in Tier 1, 2, or 3, taking action now will help ensure compliance when these regulations come into force:

Immediate priorities

1. Calculate your current NTA using the definitions in the regulations—not standard accounting definitions
2. Review your asset register to identify which assets will be excluded under the new rules
3. Assess your current ratio and establish systems to monitor it continuously
4. Calculate your revenue cap (20× NTA) to understand operational constraints
5. Review trust structures if you hold significant assets through trusts

Before your compliance date

1. Implement quarterly management reporting even if not immediately required
2. Engage with your accountant to ensure reporting templates meet regulatory requirements
3. Review your business structure if trust assets will significantly impact your NTA
4. Establish notification procedures to ensure timely reporting when triggers occur
5. Consider capital injection if operating close to tier boundaries or revenue caps

For new applicants

New applicants must comply immediately, regardless of the transitional arrangements. This includes:

• Tier 1: Compliance declaration and financial declaration
• Tier 2 or 3: Compliance declaration and MFR report

Existing builders already registered in another domestic builder class may be exempt from initial documentation requirements if their revenue does not exceed their maximum permitted revenue.

Getting it right from the start

For builders, particularly those in Tier 1 and Tier 2, the time to prepare is now. Understanding your current position, identifying compliance gaps, and establishing robust reporting systems will be essential – regardless of when your specific compliance date arrives.

The transitional arrangements provide some breathing room, but they also create a window of opportunity to get your financial house in order, restructure if necessary, and engage with the consultation process to ensure your voice is heard.