Due to Account: Meaning, Compliance & Bookkeeping in 2025

Every business, from bustling Melbourne startups to established regional enterprises, needs a solid grasp of its accounts. One term that crops up time and again in Australian bookkeeping is the ‘due to account’. As we move through 2025—with new compliance rules and reporting standards—understanding the meaning, purpose, and management of ‘due to account’ entries can save your business from costly mistakes and make audits a breeze.

What Is a ‘Due to Account’?

At its core, a ‘due to account’ is a liability account in your business’s general ledger. It tracks money your business owes to another internal department, entity, or related party. Unlike standard creditor accounts, ‘due to accounts’ are often used when a company has multiple branches, subsidiaries, or manages funds on behalf of others—think holding companies, trusts, or franchise groups.

• Example: If your company’s head office collects payments for a branch, the head office records a ‘due to branch’ liability until the funds are transferred.

• Common uses: Intercompany loans, funds held for clients, payroll clearing, and group GST settlements.

2025 Policy Updates: Why ‘Due to Account’ Matters More Now

Recent Australian Taxation Office (ATO) and ASIC guidance has sharpened focus on related-party transactions and internal balances. The 2025 financial year brought several changes:

• Increased scrutiny on intercompany loans: The ATO now requires detailed substantiation of ‘due to’ and ‘due from’ balances, especially for private groups and trusts.

• Mandatory disclosures: Large and medium-sized entities must disclose material ‘due to’ balances in financial statements under updated Australian Accounting Standards Board (AASB) rules.

• Fringe Benefits Tax (FBT) implications: Mismanaged ‘due to’ accounts related to employee expenses may trigger FBT reviews.

Failing to reconcile or properly document ‘due to account’ entries can now attract penalties or audit activity. In 2025, even small businesses are expected to maintain clear, timely records of internal balances.

Best Practices: Managing ‘Due to Account’ Entries

To keep your books compliant and audit-ready, consider the following:

• Set clear internal policies: Define when and how ‘due to’ balances are created, settled, and reconciled.

• Automate reconciliation: Use modern accounting software to track intercompany and related-party balances in real time. Most leading cloud platforms (like Xero, MYOB, and QuickBooks Online) now offer specialised modules for this purpose.

• Regular reviews: Schedule monthly or quarterly reconciliations of all ‘due to’ and ‘due from’ accounts. Unexplained or aged balances should be investigated immediately.

• Document everything: Keep supporting contracts, emails, or board minutes justifying each ‘due to’ entry. This is crucial for compliance under current ATO audit protocols.

For instance, a multi-site hospitality group in Sydney now automates its intercompany transfers, attaching digital approvals for every ‘due to’ entry, so its 2025 audit process is both transparent and painless.

Common Pitfalls and How to Avoid Them

Despite their simplicity, ‘due to account’ entries are often mishandled:

• Mixing personal and business funds: This is a red flag for both tax and legal compliance—always keep transactions arm’s length.

• Forgetting to clear balances: Old or uncleared ‘due to’ entries can distort your financial position and raise audit questions.

• Poor documentation: In 2025, the ATO expects a clear paper trail for all internal transfers—missing records can delay tax returns or trigger reviews.

By adopting disciplined processes and leveraging the latest accounting tech, Australian businesses can turn the ‘due to account’ from a compliance headache into a powerful tool for financial control.