There is so much confusion for business’ regarding this report. Many clients say they haven’t heard of this report although it has been around since the 2013 financial year, however it only applied to the building industry until the last financial year 2019.
The way it works is if a contractor does any work for your business that is in any way connected to the building industry you will need to fill in a Taxable Annual Payment Report (TPAR) at the end of the financial year and send this to the ATO. (The report is now available to fill in electronically on the business portal for the 2019 FY). It is a bit similar to sending off payment summaries needed (group certificates) at the end of the financial year for employees. The reports are then loaded onto the employees or contractors MyGov account and the ATO Tax Agent Portal. Where the ATO will check if the income reported has been included on the contractor’s tax return and if the subcontractor deductions claimed match the TPAR.
The link below will help you to identify if you fall under the building and construction industry as it is quite a broad industry and does not only relate to builders.
For the 2019 financial year, this has now extended to Cleaning and Courier Services.
For the 2020 financial year, this will be compulsory for Freight, IT, Security, Investigations, and Surveillance Services.
Don’t fall into the trap of paying cash and not receiving an invoice from the contractor. You won’t be able to claim the tax deduction. Ensure that you always receive a tax invoice from your contractor stating their ABN, Business name, address, bank details and GST amount if they are registered for GST. (check the ABN matches their details if a new contractor) If they don’t supply these details they obviously cannot get paid. The ATO has been known to request contractor tax invoices at times to check their validity and to reconcile against the TPAR if there is a dispute or discrepancy. This is the Government’s way of closing in on the black economy.
All of these reports only apply to businesses and not the general public.