What is Allowable Annual Turnover (AATO)?
Allowable Annual Turnover is the maximum level of turnover that a licensee can carry out in a licence year.
The figure includes all revenue generated by the licensee regardless of where the licensee is located, where the work is carried out, or in which industry the turnover is generated.
A licensee can either:
Provide a Declaration (self certifying) - for the 12 months renewal period - or
Provide an Independent Review Reports or Audit Reports - for the 12 months financial reporting period
What are the self certifying requirements?
Contractors (excluding builders) and designers intending to have a turnover in excess of $100,000 in the next year can provide a Declaration that they have at least $6,000 in Net Tangible Assets.
Contractors and designers intending to have a turnover of not more than $300,000 in the next year can provide a Declaration that they have at least $18,000 in Net Tangible Assets.
When providing Declaration under these provisions, the Contractor is stating that they have the required level of Net Tangible Assets in their own right, and their AATO will not exceed the specified amounts in the next year.
What are the requirements regarding licensees with intended turnovers greater than that available by Declaration?
Licensee's whose intended turnover is greater than that available by Declaration will need to obtain either an Independent Review Report or Audit Report prepared by an appropriately qualified accountant which evidences the applicant/licensee has sufficient Net Tangible Asset for the level of turnover they undertake.
These Licensees will not be able to complete a Declaration to meet the financial criteria to hold a licence.
Why are the requirements regarding licensees with intended turnovers less than $300,000 different?
In recognition that many small building contractors are under financial and managerial pressure, and that such contractors carry a lower risk factor to industry, BSA has eased the regulatory burden on such operators and at the same time delivering real cost savings to them.
How do I work out a licensee’s NTA if they want to achieve a specific level of Allowable Annual Turnover?
If the level of AATO required is more than $300,000 you can calculate the amount of NTA required by the licensee for a particular level of AATO by using the following formula from Table 1 of the Financial Requirements for Licensing booklet:
NTA = [ {(AATO-a) / (b-a)} x (d-c)] + c
The Licensee’s NTA determines his Allowable Annual Turnover for the following year. What “year” does this mean?
If the licensee is providing Declaration (self certifying), the 'year' is the renewal year. If the licensee is in Category 1 - 8 then it is the 12 month period on which the next Report will be based. This is usually the financial year of the licensee.
Example:
For licensees providing a Declaration (SC1 or SC2): the Allowable Annual Turnover is for the next 12 month renewal period.
For licensees providing an Independent Review Report or Audit Report: Licensee has a licence renewal due on 31 October 2007, and provides a Report based on 30 June 2007 year end accounts. The Allowable Annual Turnover issued to the Licensee (based on this Report) will be for the 12 months to 30 June 2008.
What does a project manager count for his Actual Annual Turnover if he is managing projects worth millions of dollars?
A project manager must include in his Actual Annual Turnover the total revenue earned. This does not include the total value of the project where substantial amounts of the value have not been paid to him directly (refer definition of “Annual Turnover” in the Financial Requirements for Licensing).
What Category does a person on wages fit into – e.g. are the wages considered turnover?
Wages are not considered turnover for the purposes of the Financial Requirements for Licensing. A person on wages or salary, and subject to PAYG system, would need to meet the minimum requirements for the class of licence that they hold.
What happens if I don’t have an Actual Annual Turnover for the previous year? What does the accountant write in the report and how does it affect my Allowable Annual Turnover?
If you have no Actual Annual Turnover for the previous 12 months, your accountant should state that you have “nil” Actual Turnover.
Your Allowable Annual Turnover for the forthcoming 12 months will depend upon the figure for Net Tangible Assets stated in the Independent Review Report or Audit Report.
Where a builder constructs speculative buildings and sells them, or sells house and land packages is the total value of the sales (house and land) included in the Actual Annual Turnover or just the value of the construction work itself?
The total value of the sale will be included in Annual Turnover.
If a licensee buys a house, lives in it, renovates it, sells it, buys another house and does the same again do proceeds from the sale of the houses form part of his Annual Turnover?
Yes - the proceeds from the sale of the houses would form part of the licensee’s actual turnover in the 12 month period that the house is sold.
