A plain-language guide to the MFR framework under the Building Amendment (Minimum Financial Requirements) Regulations 2026
From 1 July 2026, Victoria’s domestic building industry faces one of the most significant regulatory shifts in a generation. The new Minimum Financial Requirements (MFR) regulations – introduced under the Building Legislation Amendment (Buyer Protections) Act 2025 – will replace the current insurance-based eligibility system with a structured, regulator-overseen financial capacity framework administered by the new Building and Plumbing Commission (BPC).
At Xact Accounting, we work almost exclusively in the construction sector and have been deeply involved in the Queensland MFR regime since its introduction – the framework that Victoria’s regulations are closely modelled on. That experience gives us a practical perspective on what’s coming, where the risks lie, and what builders need to do now.
Here’s what’s happening, why it matters, and where we see the key issues.
The MFR regulations set out financial thresholds, reporting obligations and conditions of registration that domestic builders must meet to obtain and maintain their registration with the BPC. In practical terms, builders will need to demonstrate a minimum level of financial capacity – measured primarily through Net Tangible Assets (NTA) – relative to the volume of work they undertake.
The framework replaces the previous system, where domestic building insurers assessed a builder’s financial capacity through confidential commercial underwriting processes. Under the new regime, the regulator – not the insurer – has direct visibility of each builder’s financial health.
Builders will be classified into one of three tiers depending on the value of their net tangible assets:
The MFR framework will be phased in over a two-year period, with the largest builders required to comply first:
Builders registered as at 30 June 2026 with a current letter of eligibility are grandfathered and will not need to comply immediately, subject to conditions.
We provided a detailed submission on the exposure draft regulations through the Engage Victoria consultation process. A number of the concerns we raised were echoed by the Master Builders Association of Victoria (MBV) and other stakeholders. Here are the areas we consider most significant.
Both our submission and MBV’s recommend that the Tier 1 self-certification threshold be increased from $1 million to $2 million. The current threshold is too low and risks drawing small builders into compliance obligations that are disproportionate to the consumer risk they present. The consultation paper itself notes that 90% of Victorian domestic builders have expected revenue of up to $2 million with maximum required NTA under $100,000, which, in our view, supports a higher threshold.
The proposed 5- and 10-day notification periods for certain trigger events (such as a current ratio falling below 1, or inability to pay debts) are not workable in practice. Month-end financial close processes for most small-to-medium builders take at least two weeks, and until work-in-progress and related accruals are finalised, key financial metrics can move materially. In our submission, we recommended a 28-day outer limit from the end of the calendar month in which the builder becomes aware of the trigger. This preserves the expectation of timely notification while reflecting how building businesses actually operate.
This is the issue we feel most strongly about, because we’ve seen what happens when it isn’t addressed. The current drafting creates a real risk that Tier 2 builders could be interpreted as needing to prepare General Purpose Financial Statements (GPFS) – a substantially more onerous and expensive form of reporting than internal management accounts. In Queensland, similar ambiguity in the MFR regime led to widespread confusion, increased compliance costs, and reduced availability of suitably qualified advisers, particularly in suburban and regional practices. We strongly recommend that the Victorian framework resolve this proactively by limiting Tier 2 reporting obligations to a prescribed set of Australian Accounting Standards (including AASB 15, AASB 101, AASB 107, AASB 108, and AASB 1048), rather than requiring full GPFS preparation.
MBV has raised an important structural concern about the shift from a rolling total construction limit to a fixed annual revenue cap. Domestic builders typically manage risk through project sequencing – as one project completes, capital and exposure are released, allowing new work to commence. A revenue cap treats sequential work as cumulative exposure and doesn’t recognise this dynamic. MBV reports that for some Tier 2 operators, the proposed settings could reduce workload by 50 to 60 percent.
The four-year phase-out of trust asset recognition is a significant concern for builders who operate through trust structures for legitimate commercial, taxation, and asset protection reasons. MBV has argued, and we agree, that this phase-out may reduce reported NTA without improving underlying financial resilience. In some cases, liabilities from trust arrangements may continue to reduce NTA while the corresponding assets are excluded, creating an effective double-deduction.
The regulations take effect from 1 July 2026, but builders registered before that date are grandfathered and transition into the framework over a two-year period. Tier 3 builders begin compliance from 1 November 2027, Tier 2 from 1 March 2028, and Tier 1 from 1 July 2028. New applicants for registration from 1 July 2026 onward must comply with the MFR regulations from the outset.
NTA is calculated by taking the total value of a builder’s assets, then subtracting liabilities, intangible assets and disallowed assets. Permitted assets include cash, receivables for building work, inventory, motor vehicles, plant and equipment, real property, and shares in ASX-listed companies. Disallowed assets include recreational vehicles, unregistered vehicles, collector’s items, crypto assets, unlisted investments, and personal furniture. Trust assets are subject to a four-year phase-out.
Under the MFR framework, a builder’s annual revenue must not exceed 20 times their NTA. For example, a builder with $100,000 in NTA would have a maximum revenue cap of $2 million. If a builder expects to exceed this limit, they must notify the BPC in advance and provide updated financial information showing sufficient NTA to support the higher revenue.
It depends on your tier. Tier 1 builders (under $1 million revenue) can self-certify through a financial declaration with no accountant required. Tier 2 builders need internal management accounts prepared by a qualified, independent accountant. Tier 3 builders require signed financial statements prepared in accordance with accounting standards. A qualified accountant must be a practising member of CPA Australia, Chartered Accountants Australia and New Zealand, or the Institute of Public Accountants, and must be independent from the builder’s business.
You must notify the BPC within 10 days of becoming aware (or when you ought reasonably to have become aware) that your current ratio has dropped below 1. In our submission, we recommended extending this to 28 days from the end of the relevant calendar month to align with standard month-end close processes, though this change has not yet been confirmed.
Builders operating through trust structures will see trust-held assets progressively excluded from NTA calculations over four years. In the first year, 100% of trust asset value is permitted; this reduces to approximately two-thirds in year two, one-third in year three, and zero from year four. The transition clock starts from the commencement of MFR compliance for the builder’s relevant tier.
Builders must notify the BPC when certain events occur, including: expecting to exceed their maximum revenue (at least 7 days in advance); current ratio falling below 1 (within 10 days); inability to pay debts on time (within 5 days); NTA falling by more than 30% for Tier 1 and 2 or 20% for Tier 3 (within 30 days); changes to a guarantee (as soon as practicable); materially incorrect financial information (within 10 days); and changes to business structure (as soon as practicable).
All domestic builders registered as at 30 June 2026 must submit an initial financial report no later than 6 months before the start of their reporting year. For Tier 2 and Tier 3 builders, this report must be prepared by a qualified accountant and include a profit and loss statement, balance sheet, and statement of cash flows. The BPC will advise each builder of their reporting year commencement date by 30 September 2026.
Tier 2 and Tier 3 builders may include the value of a guarantee from a related party (such as a director, trust beneficiary, business partner, or related body corporate) in their NTA calculation. The guarantor must hold NTA at least equal to the guarantee value, and the guarantee must have a minimum 10-year term (unless the BPC approves a shorter period). Guarantees are not available to Tier 1 builders or sole traders.
Builders that are already required to lodge annual reports under section 319 of the Corporations Act or provide ASX annual documents may satisfy their annual MFR reporting by providing a copy of those reports to the BPC, accompanied by a compliance declaration. This avoids duplicating existing corporate reporting obligations.
The consultation paper indicates that guidance notes, worked examples, templates, calculators, webinars and hotline support are under consideration. Industry submissions have strongly urged the BPC to release these resources well in advance of the commencement dates, with particular emphasis on worked examples tailored to common scenarios – such as builders with June and December financial year ends and a calculator tool allowing builders to determine their tier classification and reporting obligations.
Even though full MFR compliance is still some time away for most builders, the transition period is shorter than it appears. Builders should begin by understanding which tier they are likely to fall into, reviewing their current NTA position, and engaging with their accountant to assess any gaps between their current financial reporting and what will be required under the new framework. Builders operating through trust structures should pay particular attention to the trust asset phase-out timeline.
The BPC is expected to issue written notices by 30 September 2026 confirming each builder’s reporting year start date and maximum construction limit. These notices will provide the baseline for the transition.
If you’d like to discuss how the MFR framework applies to your business, our team at Xact Accounting has been advising builders on MFR compliance since the Queensland regime was introduced – and we’re helping Victorian builders prepare now. You can reach us through our website.
This article is for general information purposes only and does not constitute legal or financial advice. Builders and their advisers should review the draft regulations and seek professional advice tailored to their specific circumstances.
