Bookkeeping & Payroll for Construction Companies

Project profitability = Revenue (invoiced) less direct costs (labour, materials, subcontractors, plant hire) less allocated overhead. Direct labour costs include wages, super, and entitlements. Materials include all site supplies and purchase orders for that project. Subcontractor costs are payments made to contractors. Plant hire includes equipment rental. Allocate a portion of head office costs (accountant, admin, rent) to each project. Use a project management system that links to payroll and accounting. Monitor project profitability monthly to identify overruns early.

The Building and Construction General On-site Award 2020 sets minimum wages, allowances (like tool allowance and area allowances), penalty rates, RDO entitlements, and other conditions for employees on construction sites. Rates vary by trade and experience level. Award rates change from the first full pay period on or after 1 July each year, following the Fair Work Commission's Annual Wage Review. You must pay at least the award minimum for the employee's classification and apply penalty rates for weekend/public holiday work. Non-compliance results in underpayment claims and Fair Work enforcement action. Always ensure your payroll system has current award rates loaded.

An employee works under your control and direction, receives regular pay, gets leave entitlements, and you withhold tax. A subcontractor operates independently, has their own ABN, invoices you, and manages their own tax and super. However, even someone with an ABN may be classified as an employee if they work exclusively for you, work under tight supervision, or don't hire others. The ATO uses a multi-factor test. Misclassification can result in back-pay claims, super underpayment, and ATO penalties. When in doubt, seek advice before engaging.

The Taxable payments annual report (TPAR) reports the payments your business made to contractors for building and construction services during the financial year (1 July to 30 June). It is an annual report, due to the ATO by 28 August each year, lodged online, paper lodgement is no longer accepted. For each contractor you report their name, address, ABN and the amount paid, including GST. Late or missed lodgement can attract ATO failure-to-lodge penalties. In construction the report can run to many contractors across several projects, so track the payments as they are made rather than reconstructing them at year end.

Tool allowance is payable to employees who provide their own tools or equipment. The Building and Construction General On-site Award sets the weekly amount, and it's adjusted each year when award rates are reviewed, increases apply from the first full pay period on or after 1 July. Because the figure moves annually, confirm the current weekly tool allowance for the relevant classification on the Fair Work Pay Calculator rather than relying on last year's number. Some site agreements or specific job requirements may specify different conditions; if the employer supplies all tools, the allowance may not be due. Document the agreement in writing with the employee.

Record each employee's assignment to projects in your payroll system. When an employee moves between projects, ensure: (1) their leave accrual continues uninterrupted (it doesn't restart), (2) award rates and allowances are applied consistently, and (3) timesheet data is allocated to the correct project for costing purposes. Some payroll systems allow you to track 'job codes' for each pay period, which helps with project costing and financial reporting. At year-end, ensure all employees have their leave liability calculated correctly regardless of which projects they worked on.

You must contribute 12% of ordinary time earnings (OTE) to an employee's superannuation fund. OTE includes the award wage and allowances (like tool allowance) but typically excludes overtime and bonuses. Under payday super (from 1 July 2026), contributions are due with each pay run and must reach the fund within 7 business days of payday. Failure to pay on time triggers superannuation guarantee charge interest and penalties. Ensure your payroll system calculates super correctly and remits with every pay run.

QBCC (Queensland) and the equivalent state licensing bodies generally require you to maintain records demonstrating: proper financial management, insurance coverage, wage compliance, and subcontractor management. Keep copies of: payroll records, superannuation receipts, contractor invoices and TPAR documentation, insurance certificates, project contracts, variation orders, and financial statements. Records must be kept for a specified period (typically 6 to 7 years). Build these records systematically as part of your regular accounting practices to ensure license audit readiness.

List all active projects and their milestone schedule (e.g., excavation 30% complete, invoice pending). Record the invoice date and expected payment date (often 30 to 60 days later). Project cash inflows based on payment timing. Track outflows: payroll (weekly/fortnightly), material purchases, plant hire, and subcontractor payments. Compare inflows vs outflows month by month. Identify months where cash inflow lags outflows and plan to cover shortfalls (e.g., operating line of credit). Monitor this weekly during high-activity periods.

Underpayment can result in: back-pay liability (all unpaid wages plus interest), Fair Work investigation and enforcement action, civil penalties (the Fair Work Ombudsman's litigation page lists the current maximums, at 8 September 2026, up to $21,840 per contravention for an individual and up to $546,000, or three times the underpayment, for a company with 15 or more employees, with ten-fold amounts for serious contraventions), criminal prosecution where underpayment is intentional (a criminal offence since 1 January 2025), damage to your builder's licence, and reputational harm. Claims can be lodged up to 6 years after the underpayment. Even honest errors are your responsibility. Award-compliant payroll is essential to prevent costly mistakes and give you confidence in your compliance.