A loss year used to be disappointing. Now it limits how much you can build.

If you're a domestic builder in Victoria, the rules about your balance sheet changed on 1 July 2026, and the change is bigger than most people realised at the time. 

The short version: your annual revenue is now capped at twenty times your net tangible assets. Which means every dollar that comes off your balance sheet takes twenty dollars of building capacity with it. 

I've had a lot of worried conversations about this lately, so here's what's actually changed and what I'd be doing about it. 

What changed 

The Building and Plumbing Commission has replaced the Victorian Building Authority, Domestic Building Dispute Resolution Victoria and the domestic building insurance function, all rolled into one regulator. 

More importantly for you, the old Domestic Building Insurance eligibility assessment is gone. In its place are Minimum Financial Requirements, and they're an ongoing obligation rather than an annual hurdle you clear once and then forget about. 

The three rules that matter 

Your tier is set by your net tangible assets

Tier 1 $1 to $50,000

Tier 2 $50,000 to $1.5 million

Tier 3 Above $1.5 million

Your revenue can't exceed twenty times your NTA

This is the one that catches people. It isn't a guideline or a target. It's a cap. 

Your current ratio has to stay at 1:1 or better, at all times

Current assets divided by current liabilities. Not measured at 30 June, but continuously. That's a genuine change in how closely you need to be watching your own numbers. 

On top of those three, every builder now has to prepare quarterly internal management accounts and provide them within 14 business days if the Commission asks. Tier 2 and Tier 3 builders generally need General Purpose Financial Reports prepared to accounting standards. 

There are also notification triggers with tight deadlines. If your current ratio falls below 1.0 you have 10 business days to tell them. If you can't pay a debt when it's due, 5 business days. 

Why a bad year hurts more than it used to 

Say you have $200,000 of net tangible assets. That gives you a revenue cap of $4 million. 

Now have a year where you lose $75,000. Your NTA drops to $125,000, and your cap drops to $2.5 million. 

One ordinary loss year has just removed $1.5 million of building capacity. Not because anyone judged the quality of your work, and not because you did anything wrong. Just arithmetic. 

The same applies to money you take out. Every dollar of drawings or dividends is twenty dollars of capacity. Take $100,000 out of the business and you've reduced what you're permitted to build by $2 million. 

That doesn't mean don't pay yourself. It means the size and timing of what you take out is now a business decision as well as a personal one, and it's much better planned than discovered. 

The trap I'd worry about most 

Work in progress. 

If you finish the year with costs sitting on the books for jobs you haven't invoiced yet, and nobody makes the adjustment, your profit and loss shows a loss you didn't actually make. 

Under the old system that was untidy. Under the new one, that phantom loss flows through your retained earnings, reduces your net tangible assets, and reduces how much work you're allowed to take on next year. 

I've seen a builder's profit and loss show a loss of around $75,000 that was almost entirely unbilled work in progress. Adjusted properly, the same year was a profit. That's a $1.5 million difference in building capacity resting on the gap between an adjusted and an unadjusted set of accounts. 

If you take one thing from this post, please make it that one. 

Two other things that catch people out 

Loans to related entities generally don't count toward your NTA unless there are enough current assets to repay them. A lot of family building businesses have money sitting in a related trust or company, and it may not be doing the work you assume it is. 

Trust assets are discounted each year, and valued at nil after four years. 

When does this apply to me? 

If you're applying for registration now, immediately. 

If you were already registered as at 30 June 2026, it's staged. It applies to reporting years starting on or after: 

Tier 3 1 November 2027

Tier 2 1 March 2028

Tier 1 1 July 2028

Which sounds comfortably far away. It isn't, because the balance sheet that gets assessed is built out of the years you're trading through right now. 

What I'd be doing between now and then 

• Work out your NTA and your current ratio today, so you know where you're starting from. 

• Multiply your NTA by twenty and compare it to your forecast revenue. If the cap is anywhere near your plans, you've found your constraint. 

• Get your work in progress adjusted properly at year end, and ideally review it monthly. 

• Start producing quarterly management accounts now rather than in 2028. You'll need them anyway, and they turn this from an annual panic into something you can actually steer. 

• Plan your drawings with the twenty times multiple in mind. 

If you'd like a hand with it 

This is the sort of thing that's far easier to sort out eighteen months early than eighteen days late. If you'd like someone to work out where you sit and what it means for the work you're planning to take on, book a free 30-minute call and we'll go through it together. 

A few questions I've been asked 

Does this mean domestic building insurance is gone?

No. You still need it, and you still purchase it. What's changed is how your financial capacity to build is assessed, which used to sit inside the insurance eligibility process and now sits in its own framework. 

What actually counts as net tangible assets?

Broadly, your assets valued under the accounting standards, less your liabilities, with intangibles excluded. But there are specific exclusions worth checking, particularly around related party loans, unlisted shares and trust assets. 

What happens if my current ratio drops below 1?

You need to notify the Commission within 10 business days. Which is another good argument for looking at your numbers quarterly rather than annually, because you can't report something you don't know about.

This is general information based on the requirements as they stand at the time of writing, and it isn't advice for your particular business. If you'd like to know how it applies to you, please get in touch.