The Victorian government has released a discussion paper for comment, setting out details of the proposed Minimum Financial Requirements (MFR) that will apply from 1 July 2026 for pool and spa builders and installers in Victoria. The MFR will be no longer be part of the insurance process to obtain domestic building insurance and instead will become part of the registration/license renewal process.
SPASA is preparing a submission on behalf of members and is keen to gather views to include in this response.
An outline of the changes is set out below.
More information about the consultation and draft regulations is available here.
What are Minimum Financial Requirements?
Currently in Victoria, builders seeking domestic building insurance are required to work with their insurance broker to verify the financial position of the business and provide a level of certainty that the business can effectively operate. This checking of financial capacity is also known as meeting the MFR.
Along with the changes to domestic building insurance from last resort to first resort, the Building & Plumbing Commission (BPC) is also seeking to remove the financial check from the insurance process and incorporate it into the registration process.
What are the proposed MFR?
The proposed MFR requirements include financial thresholds, registration conditions and reporting requirements that builders must meet when they apply for registration or seek to renew their existing registration as a building practitioner with the BPC.
The key requirements for a building company are to:
Maintain a Current Ratio of at least 1:1, showing that short-term assets (e.g. cash, property, etc) are sufficient to meet short-term liabilities
Maintain a minimum level of Net Tangible Assets based on the size of the annual business turnover at a level proportionate to annual maximum revenue.
Be able to pay debts on or before the day due.
Net Tangible Assets
Net Tangible Assets (NTA) represent the net value of a domestic builder’s physical and financial assets. This is a figure used to assess the financial stability of a business.
NTA are calculated by subtracting liabilities, intangible assets and disallowed assets from total assets. The regulations will set out a list of allowable assets and disallowed assets that can be considered to contribute to meeting the MFR requirement.
Permitted assets are expected to include cash, equipment and assessed investments, and certain related party loans. Liabilities include monies owed, shortfalls in a trust the builder manages, and any defaulted loan amounts.
Maximum revenue
Maximum revenue is the limit on how much income a registered domestic builder can earn in a year, based on the builder’s NTA. Under the MFRs, a domestic builder’s annual revenue must not exceed 20 times their NTA. Expressed another way, NTA must be at least 5 per cent of the domestic builder’s maximum revenue.
If a domestic builder expects to earn more than this limit, they will be required to notify the BPC in advance and provide updated financial information to show they have enough assets to support the higher amount of work.
What about different types of entity structures?
The regulations have provisions setting out how different businesses structures will comply with the MFR framework.
For example, where a domestic builder operates as part of a corporate group, with entities in the group subject to the same deed of cross guarantee, they must report on the financial position of the whole group, not just the individual company.
Special rules for trusts
For businesses operating through a trust structure, the share of trust assets that can be counted toward a builder’s NTA reduces to zero over four years, from the date of MFR introduction for a builder’s Tier.
Members who use a trust are urged to talk to their accountants and legal advisers now to make sure they understand the implications.
What if my business structure or financial position changes significantly?
Builders will need to keep the BPC informed of any notifiable and significant changes to the business structure or operations that impacts their financial position. This includes change of ownership; for a body corporate, change of executive officer; for a partnership, a change in partners or substantial change to partnership agreement; for a trust, a change of trustees or substantial change in trust instrument. These types of changes must be reported as soon as is practicable.
When are the new MFR requirements planned to take effect?
The new MFR reporting requirements are due to start from 1 July 2026 for all new building practitioners seeking registration as a domestic builder, including pool builders.
It is proposed that existing registered pool builders will be transitioned into the scheme over a 2-year period with large builders the first group to be captured. The business size, defined by a builder’s annual revenue and value of their NTA, will be used to determine the start date.
These ‘Tiers’ are as follows:
Tier 1. Small domestic builders
NTA $1-$50,000 (<$1M Maximum Revenue) 1 July 2028
Tier 2. Medium domestic builders
NTA $50,001 - $1.5M ($1M-$30M Maximum Revenue) 1 March 2028
Tier 3. Large domestic builders
NTA >$1.5M (over $30M Maximum Revenue) 1 November 2027
However, the MFR will apply immediately if you need to increase your insurance limits or do not comply with the terms and conditions of your current DBI eligibility. Given this many builders will probably need to comply with the MFR framework before the above dates.
How does this change work with the changes in domestic building insurance?
These changes are occurring alongside the changes to domestic building insurance. It is expected that from 1 July 2026 that the first resort home warranty scheme (FHWS) will be in place. More details on this are available here.
SPASA is working closely with our Key Member Benefits Partner, AB Phillips to establish a smooth transition process for Victorian members. More details on this transition will be available shortly.
Members with question should reach out to AB Phillips or your current insurance broker to understand how the change to first resort insurance will impact your business.
What happens next?
SPASA will make a submission on the MFR reforms setting out any concerns raised by members. Once the reforms are finalised, we will provide members with more information to assist you in managing the changes. It is important to note the proposed transition periods above, as many SPASA members are likely to need to meet the MFR requirements in November 2027, if not earlier.
The DTP consultation is open until Wednesday 4 March 2026.