Bookkeeping Basics for a Residential Builder in Australia

What it is

Bookkeeping is the daily record of money in and money out for your building business. For a residential builder in Australia it has three jobs at once: meet ATO obligations for GST, PAYG and superannuation, give the bank what it needs for finance and give you a clean picture of profit on each job.

The ATO accepts cash basis GST for businesses with aggregated turnover under $10 million and accrual basis for larger entities. Most residential builders sit in the cash camp until they grow past that threshold, then move to accrual when bank reporting or project size demands it.

The chart of accounts

A chart of accounts is the list of buckets your transactions get sorted into. A useful builder chart has separate accounts for the items the ATO and your bank care about, not a generic template imported and never edited.

Income accounts

Split income by revenue type, not by job. Common builder income accounts include:

• Contract income (fixed price residential)
• Variations and extras
• Cost plus margin recovery
• Insurance and warranty recoveries
• Interest income

This keeps the profit and loss readable and lets the bank see how you actually earn money.

Direct cost accounts

Group direct job costs so each can be matched to a tax code:

• Materials (GST on expenses)
• Subcontractor labour (GST on expenses when registered, GST free when not)
• Plant and equipment hire
• Site supervision wages
• Site disbursements (council fees, certifier fees, dial before you dig)

Overhead accounts

Keep overheads separate from job costs so gross margin per job is honest. Typical overheads are office rent, vehicles, software, insurance premiums, accounting fees and director wages.

Balance sheet accounts

Add accounts for retention held by clients, deposits received in advance, work in progress and customer progress claims invoiced but not yet paid. These accounts let you track the cash gap between when you spend money on a job and when the client pays.

Software setup

Xero and MYOB both support GST, PAYG and Single Touch Payroll reporting required by the ATO. The choice usually comes down to existing accountant preference and payroll complexity. Both let you import a chart of accounts from a template, but the default templates are generic. Edit them for the builder accounts above before you start coding transactions.

For job costing, builders usually pair the accounting file with a project tool that tracks budget versus actual at the cost code level. The two systems sync through the supplier bill or a project export. Without job costing the only profit number you see is at the end of the year, by which time a loss-making job is already past you.

ATO obligations

GST and BAS

Builders registered for GST lodge a Business Activity Statement quarterly or monthly depending on turnover and ATO direction. The BAS reports GST collected on sales, GST paid on purchases, PAYG instalments and PAYG withholding for employees. Cash basis means GST is reported when money moves. Accrual means GST is reported when invoices are issued or bills received.

Superannuation

Employers must pay superannuation guarantee contributions for eligible employees at the legislated rate, quarterly by the 28th day after each quarter. Late payment triggers the superannuation guarantee charge, which is not tax deductible. Subcontractors paid mainly for their labour can also be deemed employees for super purposes, which is a common builder trap.

PAYG withholding

Tax withheld from employee wages is reported through Single Touch Payroll each pay run and remitted to the ATO with the BAS or as a separate liability for large withholders.

Taxable payments annual report

Building and construction businesses must lodge a Taxable Payments Annual Report to the ATO by 28 August each year, listing payments made to contractors. The Taxable Payments Reporting System has been mandatory for the building and construction industry since 2012.

Daily and weekly rhythm

Daily bank feeds in Xero or MYOB pull transactions automatically. Coding takes 10 to 30 minutes a day if done little and often. Once a week, reconcile the bank, send supplier remittances and chase late invoices. Once a month, run a profit and loss by job and the balance sheet, lodge BAS on the due date and pay super for the quarter when it falls.

This routine, run by the builder or a bookkeeper, turns the books from a once-a-year tax exercise into a live management tool.