Construction accounting for builders, tradies and contractors

Most trade businesses we meet aren't short of work. They're short of information. The phone rings, the diary is full, the bank balance swings by $80,000 in a fortnight, and nobody can say with confidence which jobs made money and which ones paid for the privilege of being busy.

Construction also carries more compliance traps than almost any other small business sector: a dedicated ATO report for contractor payments, super that can be owed to subbies, payroll tax that can reach contractor payments, rules about whether your own labour income can be split, and state laws about progress claims and retention money. Here is what matters, and how we handle it.

What is construction accounting?

Construction accounting is accounting set up around jobs and contracts rather than just months and years: income and costs are tracked by job, progress claims, variations, retentions and work in progress are recorded properly, and tax and compliance are handled with the building industry's own rules in mind. It sits on top of good bookkeeping. If you want the day-to-day mechanics (job codes in Xero, recording a progress claim with a retention, WIP and the weekly checklist), read our guide to bookkeeping for construction businesses. This page covers the accountant's side.

Why do busy trade businesses still run out of cash?

Busy trade businesses run out of cash because wages, subbies, materials and the BAS go out every week while progress claims and retentions come in late. The same five patterns come up again and again.

1. Quoting from memory. The quote was built on last year's material prices and an optimistic labour estimate. Variations were done on a handshake and never invoiced. By the time anyone looks, the margin is gone.
2. Lumpy income, steady costs. A $120,000 progress claim lands, the account looks healthy, then wages, subbies, materials and the quarterly BAS all fall due before the next claim is paid.
3. GST and PAYG spent as working capital. The GST collected on a big claim belongs to the ATO. If it pays for materials on the next job, the BAS becomes a crisis.
4. Equipment bought for tax, not for need. A new ute in June saves some tax and costs cash for five years. Good timing helps; buying to "beat the tax man" usually doesn't.
5. A surprise tax bill after a good year. No tax planning in May means no chance to use super contributions, prepayments or a structure review before 30 June.

What does a construction accountant do for construction companies?

Accounting for construction companies covers the same core work as any business (BAS, payroll, financial statements, tax returns), set up for how jobs actually run, plus the industry-specific reporting and risks.

• Job costing in Xero. Every bill, timesheet and subbie invoice tagged to a job, so you can compare quoted margin with actual margin while the job is live. We connect Xero to your job management app so the coding happens at the source.
• Daily bookkeeping. Bank feeds reconciled, bills entered, supplier statements checked. If you're on one of our plans, this happens every day, not once a quarter. See our construction bookkeeping guide for how we set it up.
• Subbie compliance. We check ABNs, collect invoices, track who is a genuine contractor, and prepare the TPAR from your payment data.
• BAS, payroll and Payday Super. Including apprentice award rates, allowances and, from 1 July 2026, super paid with every pay run.
• Cash flow forecasting. A 13-week view of claims due, wages, subbies, materials, BAS and tax instalments, so you can see a shortfall coming. Our guide to building a cash flow forecast shows the method.
• Tax planning before 30 June, not after.
• Structure advice as you grow from sole trader to company, and when you take on property or staff.
• Director protection. Company directors can be personally liable for unpaid PAYG withholding, GST and super, so we keep lodgements current and flag risk early.

Accounting for a small construction business: what do you need at each stage?

A small construction business needs accounting that matches its size: a sole-trader tradie needs clean records and a well-planned tax return, while a builder with crews, subbies and a company needs monthly job reporting, payroll and year-round tax planning. Paying for more than you need is a waste; paying for less usually costs more later.

Not sure which row you're in? Ask us and we'll tell you on a free call.

Which numbers should a trade business track?

Five numbers tell you most of what you need to know. We put them in a monthly report you can read in five minutes.

For context, the ATO publishes industry benchmarks from tax return data. For plumbing services in 2023–24, total expenses ran at roughly 75% to 86% of turnover for businesses over $600,000, with labour at 23% to 33% and motor vehicle costs at 3% to 5% (ATO small business benchmarks). Benchmarks are a sense-check, not a target. The ATO also uses them to spot businesses that look out of line.

Example: two jobs, one lesson

Say an electrician quotes a fit-out at $48,000 with an expected gross margin of 37.5%. Copper prices rise, an apprentice spends two extra days on rework, and $3,500 of variations go uninvoiced.

Invoicing the variations alone would have lifted the margin to about 31%. With job costing, this shows up at the halfway point, when there is still time to raise a variation, not three months later in the annual accounts.

What tax and compliance rules are specific to trades and construction?

TPAR: reporting what you pay subbies

If your business is mainly in building and construction, you must lodge a Taxable Payments Annual Report by 28 August each year listing payments to contractors for building and construction services. The ATO treats you as mainly in the industry if 50% or more of your income or activity this year, or 50% or more of last year's income, comes from those services (ATO TPAR guidance). Payments to employees, dry hire of equipment without an operator and tool repairs aren't reported. TPAR is reported on a cash basis. The ATO matches it against your subbies' tax returns, so errors create questions for both of you.

Subbies: super, payroll tax and the employee test

A worker you call a subbie can still be an employee for some purposes:

• Super. If you pay someone under a contract that is wholly or principally for their labour, you may owe them super guarantee even though they have an ABN. Under Payday Super, that super is due with each payment.
• Payroll tax. Once your group's wages pass your state's threshold, payments to contractors can count as wages under the relevant contract rules unless an exemption applies.
• Employment law. Calling someone a contractor doesn't make them one. Our guide to employee vs contractor walks through the tests.

Personal services income: can you split your income?

If you're a one-person business paid mainly for your own labour, the personal services income rules may treat the income as yours personally, even if it's paid to your company or trust. Most tradies who quote a fixed price, supply their own tools and materials, and have to fix defects at their own cost pass the results test and can self-assess as a personal services business. Labour-hire style arrangements paid by the hour to one builder usually don't. Getting this wrong is a common cause of ATO adjustments (ATO PSI rules).

GST on progress claims and retentions

On accruals GST, you generally pay GST for the period you issue the invoice, so a claim invoiced in full with a retention held back can mean paying GST now on money you won't see for a year. A small business can often choose cash-basis GST, which solves much of this. Our construction bookkeeping guide has a worked example with the journal entries.

Retention money and security of payment

Every state has a security of payment Act that gives you a statutory right to make progress claims and take a dispute to adjudication, with tight timeframes for notices and responses. Victoria's Act was substantially reformed from 15 April 2026, including allowing monthly claims and removing the "excluded amounts" rules (Building and Plumbing Commission), so Victorian builders and subbies should check their claim templates. In NSW, head contractors on projects valued over $20 million must hold subcontractors' retention money in a dedicated trust account (NSW retention money rules). Other states have their own regimes. We track retentions owed to you and by you; the legal side of a disputed claim belongs with a construction lawyer.

Utes, FBT and equipment

• Utes. If your company or trust provides a ute, it's exempt from FBT when it's an eligible vehicle and private use is limited to commuting, work-related travel and minor, infrequent and irregular trips. Many dual cabs are designed mainly to carry passengers and don't qualify, and weekend family use breaks the exemption. Our FBT guide for cars and EVs covers the detail.
• Instant asset write-off. For 2026–27, small businesses with aggregated turnover under $10 million can generally write off assets costing less than $20,000 each. See our instant asset write-off guide.
• Fuel tax credits are available for fuel used in heavy vehicles and off-road machinery such as excavators and generators, but not for light vehicles on public roads. Our fuel tax credits agent applies the right rate for each BAS period and your accountant checks the claim.

Sole trader, company or trust: what's the right structure for a tradie?

Two points specific to construction. Directors can be personally liable for unpaid PAYG withholding, GST and super through director penalty notices, so keeping lodgements current is part of protecting the family home. And builders' licences in some states are tied to the entity and its nominee, so changing structure needs planning. More detail is in our guides to sole trader vs company vs trust and our business structuring and asset protection service.

How do we work with a trade business?

1. Free strategy call. We look at your current setup and tell you honestly whether you need more than a tidy-up.
2. Clean-up and setup. We bring the Xero file up to date, connect your job management app, set up job tracking and clearing accounts, and fix subbie records so the TPAR builds itself.
3. Daily bookkeeping. Our transaction coding agent suggests the account, job and GST code for each bank line and drafts questions for anything it can't place. Your bookkeeper reviews and approves every one. Questions come to you by SMS or email, and you can answer by replying with a photo of the receipt.
4. BAS with checks. Our BAS pre-lodgement check catches GST coding errors, such as GST claimed on wages or missing on a capital purchase, before anything is lodged. A qualified accountant signs off.
5. Monthly job and cash report. Margin by job, debtor days, and a rolling cash forecast.
6. Tax planning in April or May, with the structure question revisited each year.

All of this runs on Nagaris, the practice platform built for Australian accounting firms. The AI agents draft; our accountants review and sign off, and nothing goes to you or the ATO without a person approving it.

"We have been working with Ray and the fantastic team at BPAG Accountants for several years, and it has truly been the best decision for our company… Their invaluable support has saved us a great deal of money and time." Susan McKendry, Google review

What does it cost?

Fixed weekly pricing, so you know the cost before you start. Most trade businesses with a few staff sit on Business Insights from $249 per week + GST, which includes weekly payroll for up to 10 staff, monthly management reports and KPI analysis. Smaller operators often start on Compliance Essentials from $149 per week + GST. Compare the plans on our pricing page.

An honest note: if you're a sole trader with no staff, no subbies and a few dozen transactions a month, a good bookkeeper plus an annual tax return may be all you need. We'll tell you if that's the case.

What should you send us?

• Xero access (or your current software and last year's financial statements and tax returns)
• Your last four BAS and any ATO letters or payment plans
• A list of current jobs with quoted values, plus your job management app login
• Your subbie list with ABNs, and whether any are paid by the hour
• Payroll details, including apprentices and the award you pay under
• Vehicle and equipment list, finance contracts and logbooks
• Any progress claims or retentions in dispute

You can send photos straight from your phone. There's no portal password to remember.

Mistakes we see in trade businesses

• Paying an hourly-rate "subbie" with no super, then getting an SG charge bill years later with interest and penalties
• Lodging the TPAR late or with missing ABNs, which triggers ATO letters to every subbie on the list
• Treating a dual cab used for weekend sport as FBT-exempt
• Claiming GST on the full price of a vehicle above the car limit
• Running two businesses through one Xero file with no tracking, so neither can be costed
• Using the GST account as an overdraft, then needing an ATO payment plan every quarter

None of these are hard to fix early. They're expensive to fix late.

General information only, current as at 23 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.