Most builders don’t mind paying tax. They just want it to make sense.

So, when a builder walks in saying, “I’m paying income tax every year but I’ve got no cashflow,” it’s a red flag. And when that same builder has just received a $100,000 tax bill, it’s not just stressful — it can be a sign that the numbers behind the bill are wrong.

That’s exactly what happened with one of our recent clients.

After following us for over 6 months, he booked a meeting with us because he had a gut feel something wasn’t right. He’d been with the same accountant since he started the business and trusted the advice. But despite consistent tax bills, there was never any breathing room in the bank account — and the business didn’t “feel” that profitable.

Unfortunately, his instincts were right.

What we found: years of compounding reporting errors

Once we started reviewing the accounts and prior-year financials, we uncovered significant errors that had been carried forward year after year — all the way back to 2017.

The issues weren’t “one-off” mistakes. There were structural problems in the way the builder’s reporting was set up and reviewed:

Work in Progress (WIP) was being treated like inventory
WIP is not the same as stock sitting on a shelf ready for sale. In construction, WIP is tightly linked to progress claims, job costing, and the true position of each project at a point in time. When WIP is handled incorrectly, profits can be pulled forward (or pushed back) into the wrong year — and tax can be wildly overstated.
The accounting file was reporting figures inclusive of GST
The bookkeeper had set up the accounting software in a way that produced reports including GST, and it wasn’t picked up in the year-end process. That meant the financial statements and tax returns were effectively based on the wrong totals — overstating income and/or expenses in ways that distorted the real result.
There was a lack of proper reconciliation and industry-specific review
Builders aren’t manufacturers, and building accounts can’t be treated like a generic business. If the accountant isn’t reconciling properly and not taking the time to understand construction reporting, errors can look “reasonable” on the surface while creating completely inaccurate outcomes.

Over time, those problems can create a dangerous pattern: taxable profit on paper — but no cash in real life.

The real-world impact: tax paid that never should’ve been paid

This builder had been doing the right thing — lodging returns, relying on professional advice, and paying what he was told he owed.

But because the reporting was wrong for so long, he had effectively been taxed on profits that weren’t real.

After performing a detailed review and working through amendments, we helped him amend tax returns back to 2017. The outcome:

✅ Almost $200,000 recovered in overpaid taxes

That is money that should never have left the business in the first place — money that can now be redirected back into operations, debt reduction, staff, equipment, or simply rebuilding cash reserves.

Why this happens more than builders realise

In our experience, this kind of problem is more common than most people think — not because bookkeepers or accountants are careless, but because:

Construction accounting has unique timing issues (progress claims, retention, variations, supplier timing, subcontractor lag).
WIP needs to be treated correctly and consistently, and it must tie back to job costing and project reality.
GST setup and reporting needs to be right from day one — and reviewed regularly.
Even good accountants can miss these issues if they don’t have strong construction systems and reconciliation discipline.

Warning signs that your WIP (and tax) might be wrong

If any of these feel familiar, it may be worth a review:

You’re paying tax, but your cash balance never improves
Your accountant can’t clearly explain how WIP is calculated
Reports vary wildly month to month and don’t match what you feel on-site
Your job costing doesn’t tie to your financial statements
You’re regularly surprised by tax bills (especially large unexpected ones)

The takeaway: builders need builder-specific accounting

This client did one important thing right: he trusted his instincts and asked for help.

If you’ve got a gut feeling something isn’t right, like he once did, it’s worth getting a second opinion.

Book a free consultation today.

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