The Taxable Payments Reporting system was introduced to stem the flow of cash payments to contractors and under reporting of income.
The system was firstly aimed at the building and construction industry in 2012 and was expanded to include cleaning and courier services. It was expanded further and now; a broader set of industries have been included.
If you have an ABN, and are in building and construction services, cleaning services, courier services or road freight, IT or security, investigation or surveillance, then any payments for services you make to contractors will need to be reported to the Australian Tax Office (ATO).
Contractors can include subcontractors, consultants, and independent contractors. They can operate as sole traders (Individuals), companies, partnerships, or trusts.
Be careful here as the definition of these industries is very broad. For example, ‘investigation or surveillance’ includes locksmiths. The definition covers services that provide “protection from, or measures taken against, injury, damage, espionage, theft, infiltration, sabotage or the like.”
IT services are the provision of “expertise in relation to computer hardware or software to meet the needs of a client.” This includes software installation, web design, computer facilities management, software simulation and testing. It does not include the sale of software or lease of hardware.
Road freight is typically goods transported in bulk using large vehicles. This includes services such as log haulage, road freight forwarding, taxi trucks, furniture removal, and road vehicle towing. The addition of road freight to the taxable payments reporting system completes the coverage of delivery and logistics services as businesses in courier services are already obliged to report payments to contractors to the ATO.
If your business is impacted by this system, you need to document the ABN, name and address, and gross amount paid to contractors for a financial year. Your report to the ATO, the Taxable Payments Annual Report (TPAR), is due by 28 August each year.
Who needs to report?
The obligation to report contractor payments to the ATO is:
| Service | Reporting of contractor payments |
|---|---|
| Building and constructions services | From 1 July 2012 |
| Cleaning services | From 1 July 2018 |
| Courier services | From 1 July 2018 |
| Road freight, IT or security, or investigation or surveillance services | From 1 July 2019 |
For businesses providing mixed services, if 10% or more of your GST turnover is made up of affected services, then you will need to report the contractor payments to the ATO.
For more information or help with lodgment, please contact your nearest Murray Nankivell office.
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