Builders deal with some of the trickiest GST and BAS scenarios of any industry — progress payments, retention amounts, subcontractor invoicing, and variations all add layers most other businesses don't have to think about. Get it wrong and you either overpay the ATO or end up with a nasty surprise at reconciliation.
Here's a practical rundown of what matters.
Progress payments and when GST is actually due
For most builders, GST is payable on progress claims when the payment is received or invoiced (whichever comes first), not when the whole contract is complete. This trips people up on long jobs where the temptation is to "sort it out at the end."
What to do: Report GST on each progress claim as it's invoiced. Waiting until project completion to reconcile GST on a multi-month build is how businesses end up with cash flow problems and late BAS lodgements.
Retention amounts
Retention money withheld by a client until practical completion or the end of a defects liability period is still generally subject to GST at the time the original supply is made — even though you haven't been paid the full amount yet.
What to do: Don't let retention amounts fall out of your GST reporting just because the cash hasn't landed. Track retentions separately so you know exactly what's owed to you and what's already been reported to the ATO.
Subcontractor invoices and the GST/no-GST mix
Not every subcontractor is registered for GST, and mixing GST-registered and non-registered subbies on the same job means your input tax credits aren't uniform across your cost base. Builders sometimes assume all subcontractor costs include a GST credit — they don't.
What to do: Check GST registration status when onboarding subcontractors and make sure your bookkeeping system correctly flags which invoices carry a GST credit and which don't.
Variations that get invoiced late
Variations are common on builds, but the GST timing rules still apply to them individually — the fact that a variation relates to an earlier stage of work doesn't push its GST reporting back to that period.
What to do: Invoice variations promptly and report GST in the period they're actually invoiced or paid, not lumped in with the original contract.
The margin scheme, if it applies to you
If you're also involved in the sale side of residential construction (not just the build), the GST margin scheme may apply and changes how GST is calculated on sale — based on the margin between sale price and original purchase cost, not the full sale price.
What to do: Confirm margin scheme eligibility with your bookkeeper or accountant before the contract of sale is signed — it generally needs to be agreed upfront, not applied retroactively.
The bottom line
Most GST issues for builders come down to timing — reporting GST when it's actually due rather than when it's convenient. A bookkeeping system built around progress claims, retentions, and subcontractor tracking (rather than a generic "invoice in, invoice out" setup) prevents the vast majority of BAS headaches.
If your GST reporting feels like guesswork by the time BAS is due, we can set up a system that tracks progress payments, retentions, and subcontractor GST status properly from the start. Get in touch to have a look at your current setup.