Sooner or later, most growing Australian businesses end up with more than one entity: a trading company plus a holding company, an operating trust beside an asset-owning trust, or separate companies for separate divisions or states. The structures are usually set up by an accountant or lawyer for good reasons. What rarely gets set up is the bookkeeping discipline to match, and within a year the group has tangled intercompany balances that do not agree with each other, GST claimed in the wrong entity, and no way to see how the group as a whole is performing.
This guide covers the operating rules that keep multi-entity books clean: how money moves between entities correctly, how shared costs get recharged, what happens with GST, and how to produce a group view that means something.
Published: June 2026
Each entity in a group is a separate legal person with its own ABN, its own accounting file, its own BAS (unless grouped, more below), and its own financial statements. Multi-entity bookkeeping is the practice of recording each entity's transactions in the right entity, recording every movement between entities consistently on both sides, and then assembling a group picture on top.
The single principle underneath everything: money is never just "moved" between entities. Every transfer is one of a small number of specific things, a loan, a loan repayment, a payment for a recharged cost, a dividend, a distribution, or a capital contribution, and the books must say which.
When Entity A pays a bill for Entity B, or transfers cash to cover B's payroll, the correct record is an intercompany loan: A's books show a receivable from B, B's books show a payable to A, for the same amount, dated the same day.
Three rules keep these accounts honest.
One account per counterparty, in each file. Entity A's file carries "Loan: Entity B"; Entity B's file carries "Loan: Entity A". Lumping all related parties into one "related entities" account makes reconciliation impossible.
Mirror balances, reconciled monthly. A's receivable from B must equal B's payable to A, to the dollar, at every month end. This intercompany reconciliation belongs in the standard month-end close; a mismatch means a transaction was recorded in one entity and not the other, and every month of delay makes the archaeology harder.
Know the tax character of the balance. Loans between companies and their shareholders or associated trusts can engage Division 7A, the rules that can deem unrepaid private company loans to be unfranked dividends. Whether a particular intercompany balance needs a complying loan agreement, minimum repayments, or restructuring is a question for your tax agent; the bookkeeping job is to make sure the balance is accurate, visible, and raised before 30 June rather than discovered after.
Groups routinely have one entity carrying shared costs: head office staff employed by one company while working across three, software subscriptions, rent, insurance. Leaving those costs where they land distorts every entity's results, making the employer entity look unprofitable and the others artificially good.
The fix is a recharge: the cost-bearing entity invoices the others for their share. Doing it properly requires a defensible allocation basis (headcount, revenue share, time records, or floor space, chosen to match how the cost is actually consumed), a real tax invoice between the entities, a consistent cycle (monthly or quarterly, not an annual year-end guess), and documentation. Intra-group service charges and management fees attract ATO attention when they lack substance or documentation, so the arrangement should be written down and the basis should survive a sceptical read. Where amounts are significant, the structure of the arrangement itself is advisor territory.
Done well, recharges give you the thing multi-entity owners most often lack: a true per-entity P&L, which is the group-level version of the job profitability question, which parts of the operation actually make money.
By default, supplies between group entities are ordinary taxable supplies: the recharging entity issues a tax invoice with GST, the paying entity claims the credit, and both BAS lodgements carry the flows. Two consequences follow. First, every entity needs its transactions in its own file with its own GST treatment, which is where shared credit cards and "whoever's card was handy" spending creates genuine BAS errors, the multi-entity cousin of the problems in our guide to GST coding errors on BAS. Second, for eligible groups, GST grouping exists: related entities can register as a GST group, file one BAS through a representative member, and ignore GST on most intra-group transactions. Whether grouping suits a particular structure involves eligibility rules and trade-offs your tax agent should weigh, but owners should know the option exists, because it removes a whole category of intercompany GST admin.
Payroll has a parallel issue worth flagging: state payroll tax regimes group related businesses, so the threshold applies once across the group, not once per entity. Splitting wages across entities does not multiply payroll tax thresholds, and grouping provisions catch most common structures.
Individual entity reports answer compliance questions. The management question, how is the business doing, needs a group view, and for most SME groups that means a consolidated or combined P&L and balance sheet with intercompany balances and transactions eliminated: A's $20,000 management fee income cancels B's $20,000 expense, and the mirrored loan balances cancel each other. Without elimination, group revenue and costs are inflated by internal churn and the numbers mislead.
Practically, SME groups produce this either through reporting tools that consolidate multiple Xero files (Syft, Fathom, G-Accon and similar, compared in our Xero reporting software review) or through a controlled spreadsheet consolidation maintained as part of the monthly pack. Either works if the intercompany reconciliation is clean; neither works if it is not, which is why the mirror-balance rule above is the foundation of everything.
A hypothetical group runs a trading company (TradeCo), a holding company owning the premises (PropCo), and a service trust employing the admin team (ServiceTrust). Monthly flows: TradeCo pays PropCo rent of $12,000 plus GST under a lease; ServiceTrust recharges TradeCo $38,000 plus GST for staff under a documented services agreement; and TradeCo lends PropCo $25,000 toward a loan principal payment, recorded as an intercompany loan in both files.
At month end, the close confirms: TradeCo's loan receivable from PropCo equals PropCo's payable ($25,000 plus the opening balance), all three BAS files carry the GST on the rent and recharge, and the group P&L eliminates $50,000 of internal income and expense to show true external revenue and a true group profit. Total additional bookkeeping effort once the framework exists: a few hours a month. The alternative, untangling a year of undocumented transfers at tax time, routinely costs more in accounting fees than the framework costs to run, before counting the tax risk.
Running this discipline across multiple files every week is exactly the kind of structured work an embedded finance team is built for, and if you are weighing that against hiring internally, our hire vs outsource calculator puts numbers on the comparison.
How do I record money transferred between my companies?
As an intercompany loan unless it is specifically something else (a documented recharge payment, dividend, distribution, or capital contribution). Record it in both entities on the same day: a receivable in the lender, a payable in the borrower, and reconcile the mirrored balances monthly.
Do intercompany transactions have GST?
By default, yes: a recharge or rent between related entities is a taxable supply requiring a tax invoice, with GST reported by the supplier and claimed by the recipient. Eligible related entities can form a GST group, which removes GST from most intra-group transactions and consolidates BAS lodgement; whether to group is a decision for your tax agent.
What is an intercompany recharge or management fee?
An invoice from the entity that carries a shared cost (staff, rent, software) to the entities that consume it, on a documented, defensible allocation basis. Recharges make each entity's P&L reflect its true cost base.
Does each entity need its own Xero file?
Each entity needs its own complete set of books and its own BAS reporting, which in practice means its own accounting file. Tracking categories within one file cannot substitute, because the entities are separate legal and tax persons.
What is Division 7A and why does it matter for intercompany loans?
Division 7A is tax law that can treat unrepaid loans from private companies to shareholders or their associates as unfranked deemed dividends unless complying loan terms are in place. Accurate, monthly-reconciled loan accounts give your tax agent the information to manage it before year end.
Do multiple entities each get their own payroll tax threshold?
Generally no. State payroll tax laws group related businesses, applying one threshold across the group. Splitting wages across entities does not multiply thresholds.
How do I see the performance of the whole group?
Through consolidated management reporting: combine the entities' results and eliminate intercompany transactions and balances so internal charges and loans cancel out. Reporting tools that connect multiple Xero files, or a disciplined spreadsheet consolidation, both work once intercompany accounts reconcile.
What goes wrong most often in multi-entity bookkeeping?
Undocumented transfers recorded in one entity only, shared spending on one entity's card never recharged, intercompany balances that disagree between files, and GST claimed in the wrong entity. All four trace back to skipping the mirror-balance reconciliation at month end.
About Scale Suite
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
We review and check this guide periodically. At the time of writing (June 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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