For a long time the distinction between an employee and a contractor was very unclear and there were elements of being a contractor that were very beneficial for taxation purposes. An inability to track payments to an ABN were sought by individuals who wanted to minimize their tax liability. The ATO’s response to this was to introduce the Taxable Payments Reporting System. The result is that certain Businesses who pay contractors are required to lodge a Taxable Payments Annual Report (TPAR) which is used to identify contractors who are not meeting their tax obligations.
If your business provides any of the following services, even if it just makes up a portion of the services you provide, you are required to lodge a TPAR:
- Building and construction services
- Cleaning services
- Courier services or road freight services
- Information technology (IT) services
- Security, investigation or surveillance services
- Government entities
The information provided in a TPAR allows the ATO to identify contractors/subcontractors who have:
- Not included all their income on their tax return
- Not lodged tax returns or activity statements
- Not registered for GST when they are required to do so
- Quoted the wrong ABN on their invoices
The invoice you would have received from the contractor should have the details you need to report.
- Their Australian business number (ABN), if known
- Their name and address
- Gross amount you paid to them for the financial year (including any GST).
TPAR lodgments for the 2021 financial year are due by 28 August 2021.
Most modern accounting systems can track TPAR information provided, the system is set up correctly. Please contact our office on 03 5221 6399 or email us at firstname.lastname@example.org for more information about your reporting requirements.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.