Victorian builder minimum financial requirements: what to expect in 2026

New financial obligations for domestic builders

What you need to know and why you need to consider your options early.

The Department of Transport and Planning has released draft regulations proposing the introduction of Minimum Financial Requirements (MFRs) for domestic builders in Victoria.

These proposed regulations represent a significant shift in financial reporting and compliance obligations, particularly for small to medium domestic builders. While the regulations are currently in draft form, it is critical that builders understand the proposed changes and consider how they may impact their business structure, financial position, and future growth.

Early awareness and planning will place builders in a far stronger position as these reforms progress through consultation and implementation.

Key proposed changes:

• Building classification based on Net Tangible Assets (NTA)
  • Teir 1: $1,000 to $50,000
    Proposed commencement on or after 1 July 2028
  • Tier 2: $50,001 - $1.5 Million
    Proposed commencement on or after 1 March 2028
  • Tier 3: $1.5 Million and above
    Proposed commencement on or after November 2027
• Revenue cap introduced
  • Annual revenue will be capped at 20 times NTA
• Quarterly financial reporting  
  • Builders will be required to prepare quarterly internal management reports
  • Must be provided to authority within 14 days if requested
• Compliance reporting & notifications
  Builders must notify the Victorian Building Authority if any financial metrics fall below required thresholds, including:
  • Solvency – Ability to pay debts as and when they fall due
  • Liquidity - Maintain a current ratio of 1:1 at all times (current assets/current liabilities)
  • Net Tangible Assets in line with revenue
• Asset valuation requirements  
  • Valuation of assets need to be in line with Australian Accounting standards
  • This may result in assets being valued at market value rather than written down value or historical cost.
• Enhanced reporting for tier 2 & 3 Builders
  • Builders classified as tier 2 or 3 may be required to complete General Purpose Financial Statements
  • This represents a significant change when compared to special purpose financials which most small to medium businesses are likely currently using.
• Treatment of trust structures
  • Trust assets will be discounted over a 4-year period before being valued at nil for the purpose of NTA calculations
  • Raising questions around the viability of operating in a trust setup for some businesses.

What builders need to do now to best prepare for the proposed changes:

• Calculate your current Net Tangible Assets
• Review your current ratio and test if it currently meets the proposed metric of 1:1 – its important to note some assets are excluded from this calculation so ensure you are only including eligible assets
• Calculate your revenue cap based on your NTA and compare against current turnover levels – if your turnover exceeds this threshold, a review of your assets should be undertaken and strategies implemented to increase these.
• Review your structure if currently operating as a trust given key restraints on valuation of assets for these entities.  
• Engage with your accountant around quarterly reporting and what this will look like from a practical perspective. This can be a valuable management tool regardless of the legislation being implemented.

It is essential that domestic builders understand the potential implications of this proposed legislation and begin planning early, particularly Tier 2 and Tier 3 builders, who face earlier commencement dates and higher reporting obligations.

We recommend speaking with one of our local specialists to discuss how these changes may affect your business and to develop a strategy that ensures compliance while supporting sustainable growth.

We will continue to monitor developments closely and provide updates as the consultation process progresses, including any changes to timelines, thresholds, or reporting requirements proposed by industry bodies. 

For more information

If you would like to learn more about the topics discussed in this article, please contact your local RSM office.