Victoria moved its domestic builders onto a new financial capacity regime on 1 July. The gazetted rules set a ceiling on the total value of work a builder can carry at any one moment, and the way that ceiling is measured will catch businesses that are trading perfectly normally.
Victoria now sets a hard ceiling on how much domestic building work a registered builder can hold at any single point in time. It is called Maximum Construction Capacity. It is calculated directly from the builder’s balance sheet. Staying inside it is a condition of registration, and the regulator must suspend a builder it believes has stopped meeting the underlying requirements.
Most Victorian builders will not have noticed a thing. If you held an active Domestic Building Insurance Letter of Eligibility on 30 June 2026, you transitioned across automatically the next day. Nothing arrived in the post. Your previous total construction limit simply became your Maximum Construction Capacity. There was no reassessment, no application and no fee.
That silence is the problem. The requirements were published in the Victoria Government Gazette on 30 June 2026 and run through to 30 June 2028. They replace an annual insurance eligibility check with something structurally different: a continuous financial test that a builder has to keep passing for as long as the registration is held.
What actually changed on 1 July
The Minimum Financial Requirements and Administrative Guidelines 2026 were determined by the Building and Plumbing Commission under sections 316A(1)(a) and 316A(3) of the Building Act 1993 and gazetted under section 316A(5). The instrument was signed on 29 June 2026 by Anna Cronin as Commissioner and Chief Executive Officer. It sits alongside the shift to a statutory Home Warranty scheme that took effect on the same date, and it landed in a year when Victorian builders have also had to absorb payment reform and a domestic building contracts overhaul pushed out to 31 March 2027.
The old system asked a designated insurer whether a builder was eligible to buy domestic building insurance, and set a total construction limit as a by product of that answer. The new system asks the regulator directly whether the builder has the financial capacity to carry the work, and makes the answer a registration condition rather than an insurance condition.
DEFINITION: MAXIMUM CONSTRUCTION CAPACITY
Maximum Construction Capacity, abbreviated to MCC, is the maximum total value of domestic building work a Victorian registered builder may hold at any point in time. It replaces the total construction limit used under Domestic Building Insurance. It is set by the Building and Plumbing Commission from the builder’s adjusted net tangible assets, and compliance with it is a condition of registration under Part 11 of the Building Act 1993.
What does Maximum Construction Capacity actually measure?
This is where the instrument does something most coverage has skated over.
Total Value of Domestic Building Work is defined at clause 15 as the sum of the contract price under every insurable domestic building contract the builder has entered into, excluding only contracts where the completion date has already occurred or which have been terminated. Added to that is the market value of any speculative domestic building work carried out in Victoria where Home Warranty cover has commenced, again excluding anything already at completion.
The cap is measured on contract price, not on the value of work left to do. A slab poured last week counts for the same as a house at handover.
Read that carefully, because the practical effect is significant. The measure is not work in progress. It is not the value of work remaining. It is the full contract price of every live job on the book, whether that job is at frame stage or waiting on a final inspection.
Completion date carries the weight here. The instrument defines it as the date the occupancy permit is issued, or where no occupancy permit issues, the date of the certificate of final inspection under Part 4 of the Act. Where neither applies, the fallback is the earliest of handover of possession, valid termination of the contract, or the last day the builder attended site.
So a builder sitting on three completed houses waiting for permits to issue is still carrying the full contract price of all three against the ceiling. A builder who signs a run of contracts in a strong month can breach the cap without a single extra dollar of work being performed. The number moves on signature, not on progress claims.
How the number is set
The calculation runs in both directions. The regulator works out adjusted net tangible assets, then derives the capacity from it. The capacity in turn sets the floor the assets must stay above. For builders trying to plan a pipeline, that means the ceiling is a direct function of the working capital that sits behind them.
| Capacity band | Maximum Construction Capacity | Adjusted net tangible assets required |
| Up to and including $20 million | ANTA divided by 0.05 | 5 per cent of MCC |
| Above $20 million | ANTA less $400,000, divided by 0.03 | 3 per cent of MCC plus $400,000 |
Source: Minimum Financial Requirements and Administrative Guidelines 2026, clauses 8.1, 8.2, 14.1 and 14.2.
A worked example makes the scale clear. A builder with adjusted net tangible assets of $400,000 supports a Maximum Construction Capacity of $8 million. That sounds generous until you price it against a residential book. Six live contracts at $1.4 million each is $8.4 million, and that builder is over the ceiling even if four of those jobs are barely out of the ground.
Builders who transitioned across on 1 July kept their old total construction limit as their capacity figure. Clause 8.3 holds that number in place until the BPC reviews the builder’s financial position and sets a fresh threshold, or enters into a written agreement with them. The old limit is a placeholder, not a permanent entitlement.
The assets that do not count
Adjusted net tangible assets are assets less liabilities less disallowed assets. The allowed list is closed and reasonably practical: cash, amounts payable for work already performed under an insurable contract but not yet paid, amounts owing, inventory, investments convertible to cash, a motor vehicle, plant and equipment, real property, shares in listed companies, tools of trade, and the maximum guaranteed amount under an approved guarantee.
Loans to a related entity count, but only where that related entity itself holds adjusted net tangible assets of at least zero once any guarantee is stripped out. Lending money to a structure that is already underwater does not create an asset.
The disallowed list is where balance sheets shrink. It captures recreational vehicles including off road motorcycles, trikes, vessels, aircraft and motorsport vehicles. It captures unregistered vehicles that ought to be registered, animals kept for competitive racing, collectors’ items, contingent assets, furniture used mainly for personal purposes, shares in companies not listed on a recognised exchange, units in unlisted trusts, crypto assets and other nonmonetary credits, superannuation the builder cannot currently access, and life or income protection amounts the builder cannot currently access.
Intangible assets are excluded outright, and that means intellectual property, proprietary data such as customer lists and customised software, franchise agreements, and goodwill. For anyone who has ever valued a building business, that will sound familiar, because goodwill is only saleable if it attaches to the business rather than to a person. Under this instrument it does not count at all.
The reporting that sits underneath
There is no annual lodgement in the Victorian model. What there is instead is a set of standing obligations that bite on events rather than dates.
• A builder with a Maximum Construction Capacity of $2 million or more must prepare internal management accounts for every quarter, completed within 30 days of the end of that quarter. Those accounts comprise a profit and loss statement, a balance sheet, an aged debtors and creditors report showing when invoices are to be paid or received unless the BPC waives it, and a statement of cash flows.
• Where the capacity applied for is $2 million or more, the supporting financial information must be verified by a qualified accountant who is independent. Independent is defined tightly. It excludes employees and officers of the builder, anyone holding a controlling interest, employees or officers of a related entity, and partners of the builder. The in house bookkeeper cannot sign it.
• If a builder becomes aware it is likely to fail to comply with any of the requirements, it has seven days to tell the BPC in writing, including how and why. The same seven day clock applies once an actual failure has occurred.
• On request, the builder has 14 days to produce whatever the BPC reasonably needs to check compliance, including the quarterly internal management accounts verified by a qualified accountant.
The BPC may also appoint an independent valuer or auditor at its own cost to confirm the accuracy of anything a builder has provided.
What happens if the number stops working
Failure to meet the requirements is a ground for disciplinary action under section 179(1)(ea) of the Building Act 1993 and for immediate suspension under section 180(da).
The instrument does not say the regulator may suspend. It says the BPC must immediately suspend a registration where it reasonably believes the builder has ceased to meet the requirements.
That single word carries the piece. A discretionary power invites negotiation. A mandatory one does not, at least not at the point the belief is formed.
There is a path back, and it sits at the regulator’s discretion rather than the builder’s. The BPC may enter into a written MFR Agreement documenting a plan to reach compliance over an agreed period. Such an agreement can require a financial plan in an approved form, a capital injection, a guarantee, a reduction in the total value of work held, additional valuations or audited accounts, or any other action the BPC considers appropriate. A builder under an agreement prepares quarterly internal management accounts regardless of capacity.
Guarantees are available but they are not casual instruments. A guarantee must run for at least ten years from the date it is given unless the BPC approves a shorter period in writing. It must come with a statement of the guarantor’s financial position from a qualified accountant and a solicitor’s certificate confirming the guarantor obtained independent legal advice.
How do Victoria and Queensland compare on builder financial requirements?
Victoria has not invented this. Queensland has run a financial capacity regime since the start of 2019, and anyone who has held a Queensland licence will recognise the architecture. What differs is the thing being measured, and the difference matters.
| Victoria (from 1 July 2026) | Queensland (MFR Regulation 2018) | |
| What is capped | Total value of work held at any point in time | Revenue earned in a reporting year |
| The metric | Contract price of every live contract | Actual turnover against approved maximum revenue |
| Asset test | Adjusted net tangible assets at or above threshold | Net tangible assets at or above category minimum |
| Liquidity test | None in the gazetted requirements | Current ratio of at least 1 at all times |
| Tolerance before you must act | None. Apply before entering the contract | Up to 10 per cent above maximum revenue |
| Annual lodgement | None | Required for categories 1 to 7 |
| Event based reporting | Seven days on likely or actual noncompliance | 30 days after an NTA fall of more than 30 per cent, or 20 per cent for higher categories |
| Entry floor | Set by capacity applied for | $46,000 net tangible assets for a builder contractor licence |
Sources: Minimum Financial Requirements and Administrative Guidelines 2026 (Vic); Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018, authorised consolidation current as at 7 March 2025, sections 11L, 12, 13 and 17G; and QBCC published guidance on annual financial reporting.
The sharpest contrast is the tolerance row. A Queensland licensee can run up to ten per cent past approved maximum revenue before it is obliged to apply for an increase. Victoria offers nothing equivalent. The obligation is to apply to the BPC before entering a contract that would cause, or is likely to cause, the capacity to be exceeded. In a market where a builder can sign two contracts in a fortnight, that is a live scheduling problem rather than a compliance formality.
The second contrast is what each state is actually worried about. Queensland caps the rate at which money flows through a business over a year. Victoria caps the amount of contracted obligation a business can be sitting on at once. A builder can pass one test comfortably and fail the other.
What this signals nationally
Two states now hold a builder’s balance sheet as a live condition of the right to trade. That is a meaningful shift in how licensing and compliance frameworks across the states are being used. The licence used to be an entry test measuring competence at a point in time. It is becoming a solvency test measuring capacity continuously.
The pattern is not confined to those two. Western Australia moved to stop insolvent builders trading with new powers of its own, and the direction of travel across the regulators is the same. Read financial weakness early, act before the collapse rather than after it, and spare the statutory warranty scheme the claims.
For builders, the practical consequence is that growth now has a paperwork gate in front of it. Winning more work is no longer only a question of capacity to build. It is a question of whether the balance sheet has been assessed to support the contracted value, and whether the application went in before the contract was signed rather than after.
THE GOOD BUILDER TAKE
The word to sit with in this instrument is not capacity. It is contract price. Victorian builders reading their own numbers as work in progress will consistently understate where they sit against the ceiling, and the gap will be widest for exactly the builders growing fastest.
The second thing worth noticing is that nothing about this rewards waiting. Capacity increases are assessed on application, applications take time, and the obligation is to apply before signing. A builder who treats the ceiling as something to check at the end of the financial year has already misread it.
None of this is a reason for alarm. Queensland builders have operated inside a version of this for seven years and the sky did not fall. But it does mean the balance sheet has moved from something an accountant looks at once a year to something that determines what work you are allowed to take.
Frequently asked questions
Maximum Construction Capacity is the maximum total value of domestic building work a Victorian registered builder may hold at any single point in time. It replaced the total construction limit that previously applied under Domestic Building Insurance. It is set by the Building and Plumbing Commission based on the builder’s adjusted net tangible assets, using a formula published in the Victoria Government Gazette on 30 June 2026. Compliance is a condition of registration. Builders who held an active Domestic Building Insurance Letter of Eligibility on 30 June 2026 kept their existing limit as their capacity figure until the BPC reviews their position.
Adjusted net tangible assets are assets less liabilities less disallowed assets. Assets are limited to a defined list including cash, money payable for work already performed under an insurable domestic building contract, amounts owing, inventory, investments convertible to cash, a motor vehicle, plant and equipment, real property, shares in listed companies, tools of trade, loans to related entities holding assets of at least zero, and the maximum amount under an approved guarantee. Disallowed assets include recreational vehicles, racing animals, collectors’ items, contingent assets, all intangible assets including goodwill, shares in unlisted companies, units in unlisted trusts, crypto assets, and superannuation or insurance amounts the builder cannot currently access.
No. The Victorian requirements do not include an annual lodgement. Instead, a builder with a Maximum Construction Capacity of $2 million or more must prepare internal management accounts every quarter within 30 days of the quarter ending, and must produce them to the BPC verified by an independent qualified accountant within 14 days of a request. A builder also has seven days to notify the BPC in writing if it becomes aware it is likely to fail, or has failed, to meet the requirements. This differs from Queensland, where licensees in categories 1 to 7 lodge annual financial information.
Failing to meet the Minimum Financial Requirements is a ground for disciplinary action under section 179(1)(ea) of the Building Act 1993 and for immediate suspension under section 180(da). The gazetted guidelines state that the BPC must immediately suspend the registration of a builder where it reasonably believes the builder has ceased to meet the requirements. The BPC may, at its discretion, instead enter into a written MFR Agreement setting out a plan to return to compliance, which can include a financial plan, a capital injection, a guarantee, or a reduction in the total value of work held.
Queensland caps annual revenue. Victoria caps the total value of work held at any moment. Queensland requires a current ratio of at least 1 at all times and annual financial reporting for categories 1 to 7, and allows a licensee to exceed approved maximum revenue by up to ten per cent before applying for an increase. Victoria has no current ratio requirement in its gazetted instrument, no annual lodgement, and no tolerance above the capacity ceiling. A Victorian builder must apply to the BPC before entering a contract that would take them over.
Sources: Victoria Government Gazette No. S 365, 30 June 2026, Minimum Financial Requirements and Administrative Guidelines 2026, made under sections 316A(1)(a), 316A(3) and 316A(5) of the Building Act 1993 (Vic); Building and Plumbing Commission published guidance on Minimum Financial Requirements for domestic builders, last updated 18 August 2026; Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018, authorised consolidation current as at 7 March 2025; and Queensland Building and Construction Commission published guidance on maximum revenue, net tangible assets and annual financial reporting.
Last updated: 2 September 2026. The Victorian Minimum Financial Requirements and Administrative Guidelines 2026 remain in force until 30 June 2028.
General information only. This article describes the content of published legislative instruments and regulator guidance. It does not constitute legal, financial, taxation or accounting advice, and financial capacity requirements differ between states and territories. Builders should obtain qualified professional guidance specific to their own circumstances and structure.
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