In Australia, accounting isn’t just about balancing books but more about understanding the rules behind local law. Australian businesses operate under unique regulatory frameworks, including compliance with the Australian Accounting Standards Board (AASB) and frequent updates from the Australian Taxation Office (ATO).
It also includes region-specific obligations like Fringe Benefits Tax (FBT), Business Activity Statements (BAS), and Superannuation Guarantee changes. Yet, many offshore firms rely on IFRS or US GAAP, which don’t meet Australian compliance requirements.
This blog explores 10 basic accounting principles your outsourced accountant must know to support your business correctly and compliantly.
What Basic Accounting Principles Should Your Outsourced Accountant Know?
A dedicated outsourced accountant must know more than just how to set your company ledger and financial statements. They must demonstrate a practical grasp of Australia’s regulatory accounting standards to help your business stay compliant and financially healthy.
1. Accrual and Cash Flow Management Check
Accrual accounting is mandatory for financial reporting under AASB 101 and 15, which define when revenue and liabilities should be recorded. Your outsourced accountant must know the difference between cash and accrual accounting.
The Australian Taxation Office (ATO) allows small businesses with turnover under $10 million to report GST on a cash basis. However, financial reporting under AASB standards often requires accrual methods. A misalignment can result in inaccurate reports or even ATO scrutiny.
Offshore accountants unfamiliar with AASB-modified IFRS may misreport performance-based income or long-term contracts. Cash flow management must factor in BAS cycles, super due dates, and PAYG obligations, not just bank balances.
These factors count when you have to minimise temporary cash shortage problems during ATO payment periods and understand when liabilities are due.
2. BAS, GST, and FBT Lodgments Understanding
Your outsourced accountant must know when to lodge a BAS on time (monthly, quarterly, or annually), depending on the GST turnover of your business. Allocate GST, PAYG withholding, and PAYG instalments to correct BAS labels (1A, 1B, G1, W1, W2).
If your business imports goods, your accountant must effectively reconcile GST using the deferred GST scheme where applicable. Ensure that the STP (Single Touch Payroll) reports match your BAS lodgement.
For example, an accountant may mismatch STP and PAYG withholding data in the BAS, prompting the ATO to review employee payment history. It can lead to late or incorrect withholding penalties.
Common ATO review triggers include underclaimed GST and mismatched payroll. Moreover, Fringe Benefits Tax (FBT) is another area where non-local accountants often fall short. Many don’t realise that:
- The FBT year runs from 1 April to 31 March, not the standard financial year.
- Any non-cash fringe benefit, like company cars, event tickets, or meals, needs to be:
- Classified correctly (Type 1 vs Type 2)
- Grossed-up using ATO rates
- Declared on employees’ payment summaries (if over $2,000)
Reportable fringe benefits must be included in employees’ STP finalisation reports (previously on payment summaries). Your accountant should also identify FBT exemptions, the under-$300 minor benefit rule.
Note: Incorrect FBT treatment can trigger underreporting penalties of up to 75% from the ATO.
3. Payroll Expertise with STP Phase 2 and Superannuation Changes
Australian payroll management system has witnessed two significant developments, which include the expansion of Single Touch Payroll (STP) Phase 2 and the scheduled increase in the Superannuation Guarantee (SG) rate.
Effective from 1 January 2022, Phase 2 mandates any employer to provide more detailed payroll information to the ATO. Your accountant must know how to break down gross income into specific components, like allowances, overtime, bonuses, and commissions.
Understanding these reporting requirements is key to applying basic accounting principles to real-time payroll compliance. Payroll reporting now encompasses employment basis (e.g., full-time, part-time, casual), taxation scale codes (e.g., Medicare exemptions, study loans), and discontinuing details upon termination (with reasons).
Your outsourced accountant must also include detailed reporting of termination payments, including redundancy payouts and unused leave. Moreover, as part of the government’s plan to enhance retirement savings, the Superannuation Guarantee (SG) rate has been increased to 11.5% effective 1 July 2024, continuing its gradual rise toward 12% in 2025. This increment necessitates:
- Anticipating the financial impact of increased superannuation obligations on business cash flows and making necessary budgetary provisions.Employers must ensure super payments match the new rate.
- Leveraging accounting software like MYOB, Xero, and Employment Hero (enabled with STO Phase 2) to automate superannuation calculations and payments, thereby reducing errors and ensuring timely compliance.
- Accountants must recalculate employee cost forecasts and budgets to reflect the SG increase. Missed super payments, even if unintentional, can lead to a Superannuation Guarantee Charge (SGC) and damaged employee trust.
If your business fails to comply with these requirements, it can lead to penalties and increased scrutiny from regulatory bodies.
4. Understanding Real Compliance: Adherence to AASB & IFRS
Accurate financial reporting is a foundational part of basic accounting principles and not just a box to tick for your Australian business. If you want to scale, win tenders, or attract investors, your business finances must comply with AASB standards (incorporating IFRS with modifications).
Your outsourced accountant must know the differences and implications of AASB 15 and AASB 16, particularly for industries like construction, SaaS, retail, and multi-entity companies. AASB 15 governs how businesses recognise revenue when performance obligations are met. It is typically crucial for companies with:
- Long-term contracts
- Subscription billing
- Milestone-based project work
What must your accountant do?
Identify contract deliverables, allocate price, and recognise revenue as control transfers. Incorrect revenue recognition affects reports, valuations, and tax planning. Moreover, in AASB 16, businesses must recognise right-of-use assets and lease liabilities on the balance sheet. This impacts EBITDA, loan covenants, and lease-heavy businesses.
An offshore accounting team applying US GAAP or older AASB 117 rules may understate liabilities, creating non-compliant financial statements. Beyond measuring technical accuracy, outsourced accountants must operate under strict ethical guidelines suggested by the APESB (Accounting Professional & Ethical Standards Board).
Accounting professionals must follow the APES 110 Code of Ethics for Professional Accountants (endorsed by CPA Australia), which states that an accountant must adhere to principles like maintaining integrity, objectivity, professional competence, due care, confidentiality, and applicable professional behaviour.
5. Financial Modelling & Forecasting Proficiency
The true value lies in partnering with professionals who can deliver forward-looking insights. One of the most critical capabilities your outsourced accountant should bring is building and maintaining a three-way financial model, which connects the Profit & Loss (P&L), Balance Sheet, and Cash Flow Statement into a cohesive picture.
A 3-way model synchronises P&L, balance sheet, and cash flow to reveal true financial health. For example, a boost in sales revenue (P&L) should increase receivables (Balance Sheet) and later convert them into incoming cash (Cash Flow). Modern businesses also need scenario and sensitivity analysis so that their financial models do not remain static.
What happens if your sales fall by 15% or wages rise due to inflation? These scenarios help you plan cash reserves and identify when you may need to raise capital or assess debt capacity. With rising operating costs across many industries, sensitivity analysis is now a standard CFO-level expectation, even for small businesses.
Good outsourced accountants model scenarios using tools like Fathom, Power BI, Castaway or Syft, which integrate with Xero or MYOB. Effective cash flow planning helps forecast BAS liabilities ahead of time and manage the impacts of SG rates to align with ATO benchmarks.
6. Year-round Strategic Planning and Tax Planning
Tax planning should not start in June but should be built into your business operations all year round. Your outsourced Australian accountant might often miss valuable tax-saving opportunities because of the entire focus on compliance.
Legal tax minimisation strategies include legitimate and effective ways to reduce your tax bill if your accountant knows how to use them within the legal framework of ATO. Some proven strategies include:
- Instant Asset Write-Off: The instant asset write-off threshold for the 2024–2025 income year is $20,000 per asset. This allows eligible businesses (businesses with aggregated turnover under $10 million) to immediately deduct the full cost of qualifying assets costing less than $20,000.
- Important Dates: Assets must be first used or installed and ready for use between 1 July 2024 and 30 June 2025 to qualify. Prepaying expenses before June 30 (e.g. rent, insurance, supplier contracts) for up to 12 months gives you an early deduction.
- Updates: Without legislative extension, the threshold is set to revert to $1,000 from 1 July 2025. However, past trends indicate possible extensions or adjustments.
- Maximising super contributions up to the concessional cap (currently $27,500) for both business owners and employees. These are deductible and help in retirement planning.
- Income splitting via family trust distributions to allocate income to beneficiaries in lower tax brackets. It must be compliant with anti-avoidance ATO laws.
They should monitor tax positions quarterly, to identify opportunities to defer or bring forward income/expenses. Before potential changes, they must plan asset purchases to maximise deductions under the current threshold.
Your accountant should also be able to assess and guide the choice or restructuring of your business entity type—sole trader, company, trust, or partnership, based on tax, risk, and growth.
If your business operates through a trust and company combination, your accountant must be well-versed in Division 7A of the Income Tax Assessment Act. It governs loans and payments from private companies to deal with unpaid trust entitlements or shareholder loans. Common risks include:
- Trust distributing income to a company beneficiary but not physically paying it = deemed loan.
- Personal use of company funds without a compliant loan agreement.
Failure to comply can result in deemed dividends taxed at top marginal rates. Regularly review loan agreements and trust distributions to ensure they meet Division 7A requirements.
Pro tip: The Australian Government has announced a $325 electricity rebate for eligible small businesses in 2024–2025. While not a core principle, your outsourced accountant should be aware of such reliefs to help lower your operational costs.
7. Acknowledging Industry-specific Accounting
Accounting practices differ based on the industry type, revenue recognition, cash flow challenges, reporting requirements, and tax obligations. Your outsourced accountant must apply basic accounting principles through the lens of your industry.
Hospitality
- Tips & Gratuity Reporting: Tips (whether pooled or directly given) are considered assessable income and are subject to super and PAYG if handled by the employer.
- Shift-based rosters and awards: Penalty rates, overtime, and award compliance must be tracked via integrated payroll systems (e.g., Deputy, Tanda with Xero or MYOB).
- High staff turnover: Constant onboarding/offboarding increases STP Phase 2 reporting obligations (e.g., accurate cessation reasons, TFN declarations, super choice forms).
Your outsourced accountant must integrate POS and roster systems (like Kounta) with Xero/MYOB, review payroll against award requirements, and automate STP reporting.
E-commerce
- Reconciling across platforms: Selling on Shopify, Amazon, and eBay means income arrives through various gateways. Sales must be reconciled with payment delays, merchant fees, and refunds, often manually if tools are not integrated.
- Inventory accounting: Product-based businesses must know how to manage and report inventory changes under ATO guidelines. This includes choosing appropriate valuation methods (FIFO, weighted average) and aligning with COGS (Cost Of Goods Sold) tracking.
- GST on digital products and overseas sales: Some digital services incur GST under Australia’s GST-on-imported-digital-products rules. Accountants must identify where GST applies and track exemptions carefully.
Pro tip: Set up clearing accounts for platforms, reconcile merchant statements monthly, implement cloud inventory management tools like Unleashed or TradeGeko, and track international GST correctly.
Construction
- Job costing and WIP tracking: Costs must be accurately assigned to individual jobs. Underestimating job costs leads to margin erosion. Work-in-progress (WIP) should be reported on the balance sheet when jobs are incomplete.
- Subcontractor classification: The ATO has flagged sham contracting (Misclassifying subcontractors as contractors) as a high-risk area and incorrect classification means super, workers comp, and PAYG may be missed.
Pro tip: Use job-costing modules in software (like simPro, WorkflowMax), audit subcontractor statuses annually, and apply stage-of-completion revenue recognition with supporting documentation.
8. Compliance with Australian Data Retention & Privacy Laws
Australian data privacy and retention compliance is a basic accounting principle that offshore or cloud-based accounting and bookkeeping teams often overlook. Businesses remain legally accountable for how financial data is stored, accessed, and protected, regardless of who manages it.
That’s why your outsourced accountant must align with the Australian Privacy Principles (APPs) and legal data retention periods, primarily if you use cloud-based platforms. Under Section 262A, Income Tax Assessment Act 1936, businesses must legally retain certain records. This includes financial reports, tax returns, and employee payment summaries for at least five years.
- This retention period starts from the date the record is prepared or the transaction is completed, whichever is later.
- For companies, under ASIC guidelines, some financial records (like annual financial statements) must be retained for 7 years.
Australia’s Privacy Act 1988 outlines 13 Australian Privacy Principles (APPs), which apply to any organisation that collects and handles personal or sensitive information. Most accounting and payroll-related tasks fall under this.
Note: If your outsourced accounting service provider is storing data in offshore servers (e.g., US or India), it must comply with APP 8, i.e., cross-border disclosure obligations.
You must ask your outsourced accountant about the effective management of financial data. These include:
- Use cloud providers hosted in Australia or ones with substantial privacy compliance (e.g., AWS Sydney region, Microsoft Azure AU Central).
- Have access controls in place (e.g., MFA, IP whitelisting).
- Conduct routine data backups and store them in encrypted formats.
- Offer client data retrieval on request within 7 days (to meet record access needs during audits).
- Have an incident response plan or team in case of cyberattacks.
If they hesitate on any of these, it’s a red flag!
9. ERP Integration Support & Automation Readiness
Using more comprehensive software solutions other than Xero and MYOB offers better accounting support. Integrating with ERPs (Enterprise Resource Planning) such as NetSuite, Zoho, SAP, and Microsoft Dynamics 365 helps you automate accounting tasks such as invoicing, reporting, and reconciliation.
While not a basic principle, leveraging these systems can reduce errors and improve cash flow visibility. Your outsourced accountant must assist your business in using the capabilities of these ERPs to automate routine financial tasks, including accounts Payable/receivable, inventory management, and financial reporting.
10. CFO-Level Advisory for Strategic Finance
For growing businesses, outsourced CFOs (or VCFOs) offer strategic financial insights beyond day-to-day accounting. They review financial statements, analyse margins, assess cash flow, and help with loan structuring. A strong cash flow forecast is essential to applying accounting principles effectively in real-time.
In times of expansion or pressure, they validate forecasts and coordinate with legal and tax teams for deal planning. While not a basic accounting principle, having access to CFO advisory services (on-demand) ensures your outsourced team supports long-term decision-making, not just compliance.
Because in Accounting, ‘Almost Compliant’ Isn’t Good Enough
Outsourced accounting isn’t the problem. However, relying on teams unfamiliar with how Australia calculates super, reports STP data, or applies FBT rules is where businesses start losing compliance and control. Understanding accounting principles is foundational to building a strong CFO financial strategy.
This isn’t just about financial reporting. It’s about aligning accounting with how Australian businesses operate across industries, around tax years, and with regulatory updates that change more often than most realise.
Whether it’s recognising income under AASB 15, managing BAS cycles without penalty, or planning around Division 7A and super increases, your accountant needs to know the ground on which you are standing.
That’s why Business Avengers exists to fill the compliance gap with a technically sound and locally trained team. From payroll automation to lease accounting and tax planning services, we support Australian businesses with accounting that’s built for this tax system. Contact us today!