‘It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.’ – Josiah Charles Stamp
The building and property development industry has its own compliance regulations to ensure all the necessary standards are met.
For example, your state building authority requires that, as a builder, you must be a registered building practitioner and use a building contract when work costs more than $5,000. This work includes such things as building a house, renovations, extensions, garages, driveways, demolition and even preparing plans. You must also take out Domestic Building Insurance when the cost of the work reaches a certain level ($16,000 in Victoria or $20,000 in New South Wales, for instance). If the building project requires a building permit, there are fines that can be levied against you if you carry out that work without one.
Meeting these compliance requirements is a must, otherwise approvals will not be granted and/or rectification will be required, which can be a costly exercise. Worse still, you could lose your licences and registrations and, in certain cases, your insurances may not be able to help.
There is no difference when it comes to the financial management of your business. You need to ensure that all of your statutory compliance is met on time and with complete accuracy. If you don’t, you’ll be hit with penalties, interest and extra costs to fix the problem.
So let’s take a look at the main compliance requirements for your business, and how you can ensure you meet them.
The main compliance requirements you need to be aware of in a building and property development business include tax, superannuation, workers’ compensation, payroll tax, land tax and stamp duty.
The first obligation is to lodge annual tax returns to the ATO, be they as an individual, partnership, company, trust or self-managed superannuation fund.
The second is your obligation to lodge monthly or quarterly activity statements. Activity statements account for your goods and services tax (GST), your pay as you go (PAYG) withholding and your PAYG instalments. The frequency of your activity statements will depend on the turnover of your business (for GST) and the level of your payroll (PAYG). Irrespective of the frequency, the obligation remains the same: lodgement must take place.
Lodging your annual tax return and your monthly or quarterly activity statements can be managed with minimal effort using cloud accounting tools – a must for businesses in today’s commercial world. It not only helps with lodging on time, but also making sure you’ve reported accurately.
Meeting these ATO obligations keeps you ahead of the game. There are some non-negotiables in business and the ATO is one of them. The sooner you accept its place in business and the obligation for the lodgement and payment of your compliance requirements, the better off you will be.
The superannuation guarantee scheme requires you to provide a minimum level of superannuation for your employees, currently being 9.5 per cent of their gross pay. If you don’t pay the required minimum, you will be liable to pay a non-deductible superannuation guarantee charge, which is made up of the superannuation shortfall (the super you should have paid) plus nominal interest of 10% plus an administration charge of $20 per quarter per employee.
When you employ people on your payroll, it is relatively straightforward to understand your requirement to pay superannuation. What sometimes gets lost or forgotten is the requirement to pay the same 9.5 per cent of gross payments to your subcontractors. Not all your subcontractors would attract this requirement, but those who just supply labour as individuals/sole traders and those who work predominately for you would.
From day one of employing a labour force you must ensure that they are covered for any injury caused relating to their employment with your business.
Workers’ compensation applies in a similar manner to superannuation. If the labour, be it under an employee relationship or as a permanent or semi-permanent subcontractor, is considered to be an employee relationship in the eyes of the industrial relations and tax law regime, then workers’ compensation is required to be paid. Just like with superannuation, determining how you engage the services of subcontractors will have an impact on your workers’ compensation payments.
Should your total employee workforce reach a certain threshold, you will be required to pay payroll tax. Depending on your particular building and property development operation, this could have a material impact. Typically, in a property development project the labour force would be external to your business and therefore would not impact you at all. However, in a building operation, this is something you may need to monitor, particularly if your operation fluctuates depending on the projects you have year to year.
In a business where you hold land for investment purposes, you need to be mindful of any land tax implications. Land tax is essentially a tax for holding land for investment or business purposes. This includes property where you operate your business or property you lease to another entity to operate their business. The greater the value of land you hold, the more land tax you will pay as the percentage rate of tax increases as the value increases. The state authorities calculate the land tax based on the rateable vale of the land, which appears on your local rates notices, and multiplies it by the percentage rate of tax based on the total value. You need to be mindful of the government’s grouping provisions. These provisions dictate that if the same person is the ultimate owner, irrespective of the structure, they will be grouped together and land tax payable at a higher rate.
When you purchase land or property, you are required to pay stamp duty on the purchase. Stamp duty rates vary depending on the price of the property as well as the state in which the property is located. Regardless of your state, stamp duty adds up and is something you should be aware of when costing any acquisition.
In summary, there are many statutory compliance obligations placed upon you in your building and property development business. Being aware of these is the first step. Being set up to account for these is the second. Knowledge is power but management is success.
It is all detailed in my book, http://www.buildit-book.com.au/. Take a look now.
Are you in need of finance or funding to help grow your business? Do you clearly understand the cost of money? Contact us for a free 30 min strategy consultation. Click here to get started
Let us review your business and funding requirements to help you grow your business and achieve your business goals – big and small.
Want to take your business further with your cash? Book a 30-minute cashflow consultation and I’ll give you a copy of my book “Build It & The Money Will Come”. Click here to get started
Tony has 33 years’ experience as an accountant, and 13 years’ experience as a CPA. His first 18 years’ experience involved financial, management and operational accounting roles at a senior management level, in the security, transport, and forensic accounting industries
https://adpartners.com.au/wp-content/uploads/2017/08/logo.png00Tony Dimitriadishttps://adpartners.com.au/wp-content/uploads/2017/08/logo.pngTony Dimitriadis2017-07-03 08:09:262019-05-15 15:47:01The 3rd Step to Business Mastery.....Statutory
Established in 2001, AD Partners is a boutique public practice Accountancy and Business Consulting firm situated in heart of Carlton, Melbourne.
We service all areas of Melbourne, and offer personalised service to business owners no matter how big or small.