Appendix 5B Section 6: Director Fees and Related-Party Payments for ASX Junior Explorers

Section 6 of the Appendix 5B is short. Two lines, two totals, and one disclosure requirement that flows through to the quarterly activity report. For most junior explorers, it takes about 30 minutes to complete. But when it is wrong, the consequence is disproportionate: an ASX query that arrives days after lodgement and requires a formal response under continuous disclosure rules.

For entities where the MD or CEO also carries the finance function, or where directors provide consulting services directly to the exploration programme, Section 6 involves classification decisions that most companies have not written down anywhere. The June quarter 5B is due 31 July. Here is what Section 6 requires and where the most common errors sit.

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What Section 6 Requires

Section 6 has two lines:

• Item 6.1: Aggregate amounts paid to related parties and their associates included in Section 1 (operating activities)
• Item 6.2: Aggregate amounts paid to related parties and their associates included in Section 2 (investing activities)

The form instruction is explicit: "If any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments."

That disclosure requirement is separate from the 5B form itself. The explanatory note belongs in the body of the quarterly activity report that accompanies the lodgement. It is the most frequently missed step: the amounts appear in Section 6, but no corresponding note appears in the report. ASX flags this at review.

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Who Counts as a Related Party

For a typical junior explorer, related parties in the context of Section 6 include:

Related Party Category	Common Examples at Junior Explorers
Directors and key management personnel	Board members, CFO, Company Secretary
Entities controlled by a director	Family trusts, director-owned Pty Ltds invoicing the company for services
Close family members of directors	Spouse or adult children employed in the business
Entities over which a director has significant influence	Holding companies, sister entities under common control

At many junior explorers, the MD is also the primary geology consultant or project supervisor. In that situation, the monthly remuneration combines a director fee component and a consulting services component. Each component may sit in a different section of the 5B, and each requires its own disclosure.

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The Classification Decision That Matters

The most consequential Section 6 question is not whether a payment qualifies as a related-party payment. That is usually clear. The question is which section it belongs in: operating (6.1) or investing (6.2).

A director fee paid in the director's capacity as a board member belongs in Section 1 and is reported at item 6.1. This is the straightforward case.

A consulting payment made to a director (or an entity they control) for work that relates to exploration and evaluation activities is a different matter. If your AASB 6 capitalisation policy capitalises the cost of that work as E&E expenditure, the payment belongs in Section 2 and is reported at item 6.2, not 6.1. This is the case that most often produces a misclassification.

The trigger is not who received the money. It is what the money was for. A geologist who happens to be a director, invoicing monthly for fieldwork on the tenement, should be classified under Section 2 if the AASB 6 policy treats geological fieldwork as capitalised E&E. The fact that the payment goes to a director does not override the capitalisation analysis. The AASB 6 boundary that governs Section 1 versus Section 2 applies to related-party payments in the same way it applies to all other payments.

For more on how the Section 1 versus Section 2 boundary works across the full 5B, see our earlier guide: Preparing the June Quarter Appendix 5B.

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The Disclosure Note: What It Needs to Say

Once an amount appears in item 6.1 or 6.2, the quarterly activity report must include a description and explanation. ASX does not prescribe a specific format, but the note needs to be substantive enough to answer two questions: who received the payment, and why does it sit in the section where it is reported?

For a straightforward director fee, this is typically a single sentence: "Director fees of $X paid to [Name] in their capacity as non-executive director, classified as operating expenditure."

For a consulting payment with a mixed character, the note needs to document how the split between operating and investing was determined. If the same person receives a monthly retainer that covers both directorial duties and geological services, and those services are capitalised under AASB 6, the note should state that, explain the split, and provide the resulting amounts for each section.

The note that will attract scrutiny is the vague one: "Payments to related parties per Section 6." ASX reviewers have seen every variation of this. A specific note that names the party, describes the nature of the payment, and connects it to the AASB 6 policy is what closes the query before it opens.

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Setting Up Xero to Make Section 6 Reliable

The practical problem with Section 6 is that the information needed to complete it correctly is not all in the trial balance. The trial balance tells you an amount went to a supplier. It does not tell you that supplier is a director-controlled entity, or that 60% of their monthly invoice relates to E&E fieldwork rather than corporate management.

The setup that solves this is straightforward:

1. Separate contact entries for each related party. Each director, trust, or related entity that invoices the company should have its own contact in Xero, clearly named, with a note in the contact record identifying it as a related party.
2. A GL account or tracking category that flags related-party payments. This does not need to be a separate account for each director. A "Director and Related Party Fees" GL account, with tracking categories for nature of service, is enough to surface the Section 6 items at quarter end without a manual search through the full transaction list.
3. A written note from the consulting director each quarter. For any director providing services beyond their board role, a simple email or brief at quarter end documenting what the retainer covered and how the hours split between E&E and corporate work creates the audit trail that supports the AASB 6 classification. This takes five minutes to produce and months to reconstruct if it is missing.

With this setup in place, the quarterly Section 6 review becomes a structured check rather than a retrospective search through bank transactions.

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Three Things to Confirm Before 31 July

If Section 6 in your prior quarters has been completed quickly and the disclosure notes have been thin, the June quarter is a reasonable point to set a higher standard. Three things worth confirming now:

1. List every person and entity that received a payment from the company in the April to June quarter. Identify which of those are related parties under the definition above.
2. For any director consulting payments, confirm whether the services relate to E&E activities and document the basis for the operating versus investing split.
3. Review the last two lodged quarterly activity reports and confirm that the Section 6 narrative in each one is specific enough to name the party, describe the payment, and state which section it sits in.

How Automation Handles Section 6

The Appendix 5B Automation reads all bank transactions and bill payments for the quarter from Xero, applies the entity's AASB 6 capitalisation rules, and maps each transaction to the correct 5B section. For related-party items, it applies a separate review layer: any payment to a contact tagged as a director or related party in the client configuration file is surfaced automatically as a Section 6 candidate, with its proposed classification (6.1 or 6.2), before the output is finalised.

This means the CFO or FC sees every related-party payment in one place, with a proposed classification ready for review, rather than reconstructing the list from memory at lodgement time. The disclosure note template is pre-populated with the party name, amount, and proposed section, ready to be completed and pasted into the activity report.

The Section 6 review step cannot be automated in full: the classification of a mixed consulting retainer requires a human decision. What the automation removes is the risk that a related-party payment is missed entirely because it did not appear in the right place during a manual scan.

Syed Samir Ahmad
Founder, Genius Accounting Solutions
CA ANZ | MBA | Salesforce Certified (4x) | Xero Partner