The property and construction industry has once again been identified as a sector of concern by the ATO, with recurring compliance issues placing builders, contractors and tradies under closer review.
This industry has long been considered high-risk by the ATO, due to its reliance on subcontracting, complex payment arrangements and, in some cases, cash transactions. But the renewed focus comes at a time when businesses are already managing significant economic and environmental pressures that compound the risks of non-compliance.
Key compliance issues
The ATO continues to flag common problem areas across the sector:
- Incorrect R&D tax incentive claims – particularly where activities do not meet strict eligibility requirements.
- Omission of income – including sales not reported in BAS or tax returns, and income excluded from related-party transactions.
- Overclaiming deductions and GST credits – often due to poor record-keeping or misinterpretation of eligibility.
- Private expenses claimed as business – or insufficient apportionment between personal and business use.
- Failure to register for GST – despite turnover exceeding the compulsory registration threshold.
- Lack of professional advice – particularly in relation to head contractor and subcontractor obligations.
The broader pressures at play
Economic headwinds
Construction businesses are being squeezed by rising material and labour costs, ongoing skills shortages, and higher borrowing costs. Fixed-price contracts and tight margins leave little room for error. Project delays, approval bottlenecks and financing constraints only add to the pressure. In this environment, compliance mistakes – whether through oversight or aggressive claims – can quickly lead to penalties and reputational damage.
Environmental obligations
The sector is also grappling with tighter environmental standards. Sustainability requirements now extend across energy efficiency, waste management, carbon emissions and biodiversity protections. Failing to meet these obligations not only risks regulatory penalties, but also increases costs and delays. At the same time, market demand is shifting towards “green” buildings, meaning reputational risks are as significant as compliance risks.
Together, these forces create a landscape where businesses must balance commercial pressures with more stringent reporting, record-keeping and governance.
Practical steps for construction businesses
To reduce risk, operators should:
- Seek professional advice early – particularly before claiming R&D incentives or GST credits.
- Review income reporting systems – ensuring all sales, including related-party transactions, are captured accurately.
- Tighten expense management – separating private from business costs and correctly apportioning shared expenses.
- Confirm GST obligations – to avoid late registrations and retrospective liabilities.
- Embed sustainability into compliance – tracking environmental reporting requirements with the same diligence as tax reporting.
- Maintain thorough documentation – from subcontractor agreements to R&D activities and environmental compliance records.
The bottom line
The ATO has made its position clear: compliance in the property and construction sector remains a priority. At the same time, businesses are facing higher costs, stricter environmental expectations and mounting regulatory complexity.
The message is clear: getting the fundamentals right today will protect businesses from unnecessary risk and position them for long-term success.
At Pitcher Partners, we work closely with builders, developers, and contractors to navigate the evolving tax, regulatory and environmental landscape. If you’d like to discuss how these changes may affect your business, or need support reviewing your compliance processes, please get in touch with our team.
