If You’re a Builder – You Need a Good Accountant Now

DBI Changes Could Impact Your Business

The home building industry has been through a tough time of late, with many choosing to leave the industry. While some builders have gone broke, many more have left due to the challenging industry conditions caused by over regulation, high costs and difficult clients. The situation is now stabilising somewhat, however, low sales numbers and ever increasing red-tape may result in more people leaving.

Unfortunately, this red-tape burden is set to increase over the next few years as the impact of the Buyer Protection Bill comes into effect. The new Statutory Insurance Scheme will start to operate from 1 July 2026 and will change the way that builders are assessed for DBI.

At present, a registered (licensed) home builder who wants to carry on business doing any significant home building work needs to not only be registered with the BPC (formerly the VBA) but also hold eligibility to purchase domestic building insurance policies. This eligibility can be obtained with the VMIA – which is now part of the BPC – or with a private insurance company.

Under the new regulatory system, builders will only have to deal with the BPC for both their registration and their insurance needs. This should hopefully simplify the process of obtaining and renewing a builder’s registration and insurance, and provide greater transparency and accountability. In particular, appeal rights against poor decisions by the BPC should be available to give home builders a better chance of getting insured or avoiding unfair limits on their insurance.

However, new Minimum Financial Requirements will eventually replace the current DMI eligibility requirements. These new requirements will be set out in regulations and may involve the use of different tiers of builders depending on their financial situation. Eligibility is likely to be determined by things such as Net Tangible Assets, Revenue/Turnover and other data available to the BPC. There will be a transition period to allow builders to understand and prepare for these new financial requirements. The HIA will keep members informed of these requirements, which are currently the subject of consultation with industry. However, they are likely to mirror those in Queensland.

There are concerns that the BPC will adopt a more conservative approach when determining what is and is not included in its determination of eligibility for DBI. Of particular concern is how trading trust and corporate groups are assessed. If trading trust assets are removed from the calculation for determining a builders’ DBI eligibility, this may result in their DBI limits being reduced, impacting their business viability. This in turn may cause builders to consider unwinding these trusts, at great expense and potentially liability for capital gains tax.

Having a good accountant will be more necessary than ever. They will need to have a good understanding of your business, and if you operate a trading trust, the costs and consequences of changing that structure if required. It is also likely that most builders will be required to have their accounts prepared and signed off by an accountant, with larger builders potentially facing audit requirements.

Once the new financial requirements are finalised, it is recommended that home builders talk to their accountants about these changes. The sooner the builder is prepared, the smoother the transition is likely to be. Don’t leave things until the last minute.

The Victorian government is currently consulting with industry, including accountants, about the new domestic building insurance and minimum financial requirements. It is expected that the proposed regulations will be available for public comment later this year or early next year.

HIA members are welcome to contact us on 1300 650 620 for further advice.