The test builders forget — and fail
Net Tangible Assets gets the attention, but there is a second test every QBCC licence holder has to pass: the current ratio. The QBCC requires a current ratio of at least 1:1 — meaning at least $1 of current assets for every $1 of current liabilities. It is the measure of working capital, and it is the test that catches strong businesses with weak balance sheets.
A builder can be profitable, growing, and sitting on a healthy NTA — and still fail the current ratio. When they do, the licence is at risk, even though the business looks fine on paper.
What the current ratio measures
The current ratio compares current assets (cash, debtors, stock, work in progress) against current liabilities (trade creditors, GST and BAS payable, short-term loans, the current portion of any director loans). It answers a simple question: if everything came due today, could the business pay its short-term obligations from its short-term resources?
A ratio of 1:1 means current assets exactly cover current liabilities. Below 1:1, the business is technically short — and the QBCC reads that as a licence risk, because a builder who cannot meet short-term obligations is a builder who cannot pay subcontractors, suppliers, or claims.
Where strong builders fail it
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Profit tied up in work in progress. A builder can be billing well but carrying large WIP that has not yet converted to cash. The asset is there, but if the liabilities are current and the asset is not, the ratio suffers.
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Director loans sitting as current liabilities. Where a director has lent to the business and the loan is classified as current, it sits on the liability side of the ratio. A large current director loan can drag the ratio under 1:1 even in a healthy business.
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GST and BAS accruals. Tax payable that has accrued but not yet been lodged sits as a current liability. A builder who runs their books close to lodgement can have a ratio that dips at the wrong moment.
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Growth consuming working capital. Growth is the classic ratio killer. Taking on bigger contracts means more creditors, more WIP, more overheads — all current — before the revenue lands. A builder growing from $2m to $5m can pass every other test and fail this one.
Why it matters more as you grow
The current ratio test does not disappear at higher categories — it sharpens. A Category 2 builder turning over $5m–$10m carries far more working capital movement than a Category 1 builder. Bigger contracts mean bigger creditor cycles, bigger WIP, and bigger GST accruals. The ratio that held comfortably at $2m can fail at $5m without anyone noticing — because no one is watching it.
The QBCC's own research flags higher-turnover builders as among the highest insolvency risk. The current ratio is one of the earliest indicators of that risk, and it is one of the easiest to manage — if it is being watched.
How regular catch-ups keep the ratio above 1:1
The current ratio moves every time a bill goes out, a creditor is paid, or a loan is reclassified. The only way to keep it above 1:1 is to track it through the year. On a fixed cadence of catch-ups, we:
- Calculate the current ratio each period, so you know where it sits against the 1:1 floor.
- Reclassify director loans and related-party lending where legitimate, so they stop dragging the ratio.
- Time the conversion of WIP to billings, so current assets land when they are needed.
- Manage the GST and BAS cycle, so accruals do not spike the liabilities at the wrong moment.
- Plan for growth, so the working capital is built ahead of the contracts that will consume it.
A builder who watches the ratio in March fixes it in April. A builder who sees it in July has already failed the test.
How we help
We work with QBCC licence holders to keep the current ratio above the line:
- We confirm your current ratio against the 1:1 requirement, and tell you whether you are safe, borderline, or exposed.
- We set a fixed cadence of catch-ups where the ratio is tracked and managed through the year.
- We restructure loans, time billings, and manage accruals to keep the ratio healthy.
- We prepare the working capital evidence for every MFR report and category application, so the ratio the QBCC sees is the ratio that holds up.
If you do not know your current ratio today, you do not know whether your licence is safe. Call the direct line — we will confirm the number and set up the catch-ups that keep it above 1:1.
