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 are indexed annually in September. 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.

Taxable Payment Annual Report (TPAR) is a record of all payments made to contractors ($300+) that must be lodged with the ATO by 28 June each year for the previous financial year (1 July – 30 June). TPAR includes contractor name, address, ABN, and amount paid. Failure to lodge on time or inaccurate lodgements result in penalties starting at $1,100. In construction, TPAR is critical because you may pay multiple contractors on the same project. Use a payment tracking system to automate TPAR preparation.

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 RIBA (NSW/ACT) licenses 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 6–7 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 30–60 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 up to $15,800+ per breach, potential criminal prosecution for serious breaches, damage to your QBCC or RIBA license, 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.