The Victorian Government is introducing major reforms to improve confidence in the domestic building industry, and one of the most important changes is the introduction of the Building Amendment (Minimum Financial Requirements) Regulations 2026, which will regulate the new Minimum Financial Requirements (MFRs) for domestic builders.
The proposed MFR Regulations, to be made under the Building Act 1993, will support the implementation of reforms introduced by the Building Legislation Amendment (Buyer Protections) Act 2025 to enhance protections for consumers in the building industry, such as the First Resort Home Warranty Scheme, Rectification Orders, and the Developer Bond Scheme. Thes reforms are designed to collectively strengthen buyer protection and improve oversight across Victoria’s building sector. At first glance, this reform appears quite technical, but has an important rationale behind it, which is that builders should be financially stable enough to finish the work they take on. For homeowners, this means better protection; for builders, it means clearer and fairer rules, and for the industry, it creates more transparency and trust.
What Is Changing?
Previously, a builder’s financial capacity was mainly assessed by private domestic building insurance providers. This created several problems, as each insurer could apply different rules, their assessment processes were often confidential, and it was often on a project-by-project basis. This made business planning difficult and reduced transparency for consumers.
Under the new system, that responsibility shifts to the Building and Plumbing Commission (BPC). Instead of private insurers deciding whether a builder is financially suitable, builders must now meet clear minimum financial standards set by the BPC in order to apply for, and keep, their registration.
Why This Matters
This reform is aimed at one major issue: builders collapsing mid-project. When a builder takes on too much work without enough financial backing, the risk falls on homeowners, often leaving them with incomplete homes, delays, and major financial loss. The MFR system aims to reduce that risk by requiring builders to prove they have enough capital, enough short-term cash flow, and proper financial reporting in place before they can continue operating. It creates a clearer link between how much work a builder can take on and how financially capable they are of completing it.
What Builders Must Show
The new requirements focus on a few key financial measures:
Net Tangible Assets (NTA)
This refers to the real value of a builder’s assets after liabilities are taken away. Only assets that are real, verifiable, and available to support the business can be included, such as working capital, core business assets, and certain receivables. Things like old debts, uncertain investments, trust-held assets, or assets dependent on future events are generally excluded. This prevents builders from appearing financially stronger on paper than they actually are.
Current Ratio
This measures whether a builder can pay short-term debts as they fall due. Builders must maintain a minimum current ratio of at least 1, meaning they should have enough short-term assets to cover short-term liabilities.
Maximum Revenue
A builder’s annual revenue cap is linked directly to their financial capacity. Under the regulations, Maximum Revenue is set at 20 times the builder’s NTA. This means builders cannot take on unlimited work, they must stay within a revenue level their capital can realistically support.
Different Rules for Different Builders
Not every builder operates at the same scale, so the system uses a tiered structure.
Tier 1 – Small Builders
Designed for smaller operators and sole practitioners.
The requirements are simpler and reporting is lighter. Builders mainly submit a signed financial declaration confirming they meet the standards.
Tier 2 – Medium Builders
These builders face higher financial expectations and must provide internal management accounts and additional financial details if requested.
Tier 3 – Large Builders
Larger builders have the most detailed reporting obligations, including full financial statements, supporting notes, and director sign-off.
This approach keeps the rules proportionate, where smaller builders are not overburdened, while larger builders face stronger oversight due to the higher financial risk involved.
Ongoing Reporting and Compliance
Meeting the requirements once is not enough – builders must report annually to the BPC and also notify the regulator if major financial changes occur, such as:
- significant drops in capital
- liquidity problems
- changes to business control
- changes to guarantees relied on for financial support
This allows the BPC to identify problems early, rather than waiting until a builder collapses.
What This Means for Consumers
For homeowners, these reforms should mean greater confidence when signing a domestic building contract. Rather than relying on private insurers making confidential assessments, there is now a clear regulatory framework with consistent standards and direct oversight. Consumers gain stronger protection because builders must demonstrate financial stability before taking on major residential projects.
Whilst feedback from the public consultation is currently being reviewed, final regulations will be introduced from 1 July 2026.
Victoria Government Gazette: No. S 54 Wednesday 4 February 2026
Department of Transport and Planning: Clear and fair financial standards for builders
