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Under the QBCC Minimum Financial Requirements Regulation (MFR Regulation) you are required to have certain levels of working capital to enable you to obtain or renew your licence. The measurements they use for this purpose are your Current Ratio and your Net Tangible Assets (NTA).
The Current Ratio is calculated by dividing your current assets by current liabilities and this must be at least 1 to 1.This indicates your current assets are either equal to or more than your current liabilities.
Current liabilities include any debt that is payable in the next 12 months. Typically, this includes creditors, ATO debt, employee super and any loan payments that are due during this period-Current assets include cash at bank, debtors, work in progress (WIP) and other payments you will receive in the next 12 months.
If there are related party loans these are excluded from the current ratio calculation unless it can be confirmed that they will be repaid within the next 12 months.
The amount of your Net Tangible Assets (NTA) determines what your turnover can be and as such governs your licence category.The two lower level licenses SC1 (turnover up to $200,000) and SC2 (turnover up to $800,000) have a minimum set requirements for the NTA, being $12,000 for SC1 and $46,000 for SC2.
The NTA required for licenses in categories 1 to 7 (with turnover greater than $800,000) is calculated on a sliding scale. This can be calculated using the calculator on the link below,
NTA Calculator
To calculate your NTA you deduct your total liabilities from your total assets (excluding certain assets) with the balance being your NTA.Excluded assets include intangibles, jet skis, boats, motor bikes and shares held in related entities.This link provides a full list
Once you have calculated your NTA you can determine your allowed turnover. They allow licensees to go 10% over their maximum turnover without applying to increase their licence. However, if you know you will breach you should seek to increase you licence to the next category.
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