BAS and GST Guide for Australian Builders

GST in the construction industry is more complicated than it looks on the surface. Most supplies a builder makes are taxable, but there are exceptions — and the way progress payments, retentions, and subcontractor payments interact with your BAS obligations can catch even experienced operators out. This guide covers the fundamentals that builders need to have right every quarter.

When do you need to register for GST?

If your annual business turnover is $75,000 or more, GST registration is mandatory. For most builders doing residential or commercial work, this threshold is passed quickly. Once registered, you charge 10% GST on your taxable supplies and can claim GST credits on your business purchases — these credits are called input tax credits.

Registration is done through the ATO, either directly or through your BAS agent. Once registered, you must lodge a Business Activity Statement (BAS) regularly — either monthly or quarterly, depending on your turnover.

What counts as a taxable supply in construction?

Most construction work is a taxable supply, meaning you charge GST and can claim input tax credits on your costs. The main exception for residential builders is the margin scheme for property sales — if you are building and selling new residential properties, you may be able to use the margin scheme to calculate GST on the sale rather than the standard method. This can significantly reduce your GST liability on property sales.

GST-free supplies you may encounter include certain sales of going concerns, certain residential rent (which is generally input-taxed), and a small number of specific construction-related services. If you are unsure whether a particular supply is taxable, check with your accountant — getting this wrong in either direction creates problems.

Progress payments and when GST applies

On construction contracts with progress payments, GST applies at the time each payment is invoiced or received — whichever comes first. This means your GST liability arises when you issue each progress claim, not when the project is complete. Most builders account for GST on a cash basis if their turnover is under $10 million, which means GST is reported in the period the payment is actually received rather than when invoiced.

Retention amounts are treated differently. Retention held by a head contractor is not invoiced until it is released, so GST is not due on it until that point. Make sure your BAS agent is treating retentions correctly in your reporting.

Subcontractor payments and PAYG withholding

If you engage subcontractors who are registered for GST, they charge you GST on their invoices and you claim the input tax credit. If a subcontractor is not registered for GST — because they are under the $75,000 threshold — they do not charge GST and you cannot claim an input tax credit on those payments.

Separately, under the taxable payments reporting system (TPRS), builders must report total payments made to contractors providing building and construction services each year. This is done via the Taxable Payments Annual Report lodged with the ATO. Failing to lodge this report carries penalties.

Keeping receipts organised for BAS

The practical bottleneck for most builders at BAS time is receipts. Fuel, materials, tools, subcontractor invoices — they accumulate across the quarter, and trying to organise them all in the week before BAS is due creates errors and missed claims. The better approach is to capture and categorise receipts as they come in, so the BAS preparation is a review rather than a data-entry exercise.

Input tax credits you miss because receipts were lost are gone. The ATO allows you to claim credits in a later period if you find the documentation, but practically, most builders just lose them.