Australian agencies face a unique set of compliance challenges, particularly around GST, international services and contractor payments. Getting this wrong won’t just lead to an audit; it can also hurt your financial bottom line.
Here’s a checklist of essential bookkeeping and tax compliance areas that your marketing or SEO agency should master.
1. The GST Minefield: Domestic vs. International
Your service location determines your GST obligations. Your bookkeeper should apply GST correctly to every transaction.
Australian clients: The standard rule is to charge 10% GST.
International clients (exports of services): If your client is outside of Australia (even if the work is delivered digitally), the service is usually GST-free (or “input tax”). This is important for agencies with overseas clients.
Problem: Many agencies mistakenly charge GST to overseas clients or, conversely, do not claim GST back on local expenses related to GST-exempt income.
Bookkeeping best practice: Use a specific tax code in your accounting software (e.g., “GST Free Export”) and ensure that the client’s location is clearly indicated on your invoices. This makes your quarterly Business Activity Statement (BAS) accurate and safe for ATO review.
2. Digital Services And Foreign Currency
If you run campaigns that pay for services in foreign currencies (e.g., buying Google Ads in USD, paying a developer in INR), your bookkeeping must be accurate.
Foreign Currency: When processing foreign currency transactions, your bookkeeping records should include two figures: the foreign currency amount on the date of the transaction and the AUD equivalent. You should use one of three consistent methods: daily exchange rate, 28-day average, or an acceptable rate from a public source.
Impact: Fluctuations in exchange rates create a foreign exchange gain or loss. This should be properly recorded in your profit and loss statement, as it is a taxable event.
3. Contractor vs. Employee: SGC Risk
Like many professional services, your agency relies on contractors (freelance designers, copywriters, specialist coders). This is a key compliance area for the ATO regarding the Superannuation Guarantee Charge (SGC).
Rule: If you pay a contractor primarily for their labour, even if they have an ABN and issue an invoice, you may still be legally required to pay a superannuation guarantee (currently 11%).
Bookkeeping priority: Use the ATO’s Employee/Contractor Decision Tool for every new engagement. Don’t rely solely on contracts. If the tool indicates an employee relationship (for super purposes), your bookkeeping system should track and make provision for SGC.
Penalties: Failure to pay SGC for a deemed employee results in SGC, plus interest and administration fees, which are not tax-deductible.
4. Classify expenses For Deductions
Digital agencies have unique expenses that must be classified correctly to maximize tax deductions.
Research and Development Tax Incentives: If you develop new or significantly improved software, proprietary tools or unique processes for SEO/AI, you may be eligible for generous Australian Research and Development (R&D) tax incentives. You should carefully track related labour costs and direct costs.
- Software and Subscriptions: Clearly break down your expenses into:
- Operating expenses (now deductible): Monthly SaaS subscriptions (SEMRush, Ahrefs, Adobe, etc.).
- Asset purchases (depreciation over time): High-value purchases such as new computers, servers or large software licenses.
Takeaway:
Compliance is not a burden; it is a shield. By implementing these rigorous bookkeeping practices, your agency ensures it is ATO compliant, reduces unnecessary tax and penalty costs, and is positioned to focus entirely on client success.
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