Taxable Payments Annual Report


29th April, 2019

Changes to Taxable Payments Reporting in 2019

If you run a business that makes payments to contractors, you’ll want to stay ahead of changes to the Taxable Payments Reporting System (TPRS) no matter what industry you’re in.

When you run a business, you have to keep up to date on all the latest regulations and changes in both legal and tax fields.

Things change regularly, and the onus is on entrepreneurs to do their own reading and other learning to stay abreast of new developments.

A fine example of something business owners need to know about right now is the Taxable Payments Reporting System (TPRS).

In particular, business owners must understand and adhere to the system’s corresponding Taxable Payments Annual Report (TPAR).

It means more paperwork, unfortunately, but shouldn’t take too long to complete each year once you get organised.

Here’s what you need to know.

What is the Taxable Payments Annual Report?

In 2014, the Australian Government introduced Taxable Payments Reporting for businesses in the building and construction industry.

This was done to improve tax compliance within the sector. The changes meant businesses had to report the total payments made to each of their contractors annually to the ATO.

The reports had to date back to Financial Year 2013, and were titled the Taxable Payments Annual Report or TPAR for short.

Businesses affected at the time were any that:

  • Operated primarily in the building and construction industry
  • Made payments to contractors or subcontractors for building and construction services
  • Had an ABN

The Government reported that this new system protected $2.7 billion from being lost to the ‘black economy’ in the building and construction industry in the 2015-2016 financial year.

(The black economy is a term used to refer to people who operate outside the tax and regulatory systems or who don’t report their tax obligations correctly.)

But, concerned that other changes were needed, the Government established a ‘Black Economy Taskforce’ in late 2016.

The Taskforce was charged with investigating and suggesting ways to deal with the harm caused to honest businesses and the community by those who don’t properly report their income.

The Taskforce released their Final Report in October 2017. It contained 80 recommendations to the Government.

Many of these recommendations were, in turn, endorsed by the Government.

Extensions to the TPRS in 2019 and beyond

As part of the Taskforce’s recommendations, the Taxable Payment Reporting System, or TPRS for short, has been extended.

The plan is to reduce the incidences of people being paid as contractors illegally. It strengthens the government’s ability to match the information provided on contractors’ income tax returns to that listed on business reports.

The ATO can more easily pick up on discrepancies and detect people trying to hide income and evade tax.

Now, in addition to covering the building and construction industry, the system will also cover other sectors which the taskforce identified as being high risk for black
economy activities.

These industries are information technology, cleaning, road freight, courier, security, and investigation and surveillance services.

READ: A handy EOFY checklist for small business owners

Anyone operating a business in these areas and paying contractors must start adhering to the TPRS and compiling a TPAR each year.

There are different deadlines for each industry, so make sure you understand which one relates to your business.

Taxable payments annual reports for ventures that supply courier or cleaning services must be submitted by 28 August 2019. This covers payments made during the 2018-2019 financial year.

For businesses in IT, road freight, security or investigation or surveillance services, there is an extra year. These reports are due by 28 August 2020, and cover the 2019-2020 financial year.

How to prepare your business for Taxable Payments Reporting

Now is the time to get prepared for these changes if your business is in one of the sectors the system has been extended to.

If your level of record keeping isn’t adequately capturing the information required, you’ll need to review the way you keep records.

It’s a good idea to contact your qualified, licensed accountant or other professional advisor (such as a tax agent) ASAP. They can assist you with setting up new systems to ensure you’re compiling and reporting the right data.

Find a registered tax agent with MYOB’s Partner Search.

In most cases, all the information you need for your TPAR will be in the invoices received from contractors, consultants and independent contractors.

Note that these people can be operating as sole traders, partnerships, trusts or companies.

The details you need to report include:

  • The contractor’s ABN
  • Their name (individual or business)
  • Their address
  • The gross amount you paid to them for the financial year, including any GST paid and any tax withheld

Be aware that if you receive invoices that include both labour and materials, you have to report the total amount of the payment. This is regardless of whether the invoice is itemised or combined.

If you use the same contractors throughout the year, check with these people that their ABN is the same and hasn’t changed over the period.

You can use the ABN Lookup facility online to check ABNs if needed.

If you update ABNs, this will reduce the likelihood of the ATO contacting you about errors in your TPAR.

Another tip is to ensure you’re using a feature-rich accounting and payroll software program.

When you use software which has TPAR functionality built in, this makes it quicker and easier to comply with the new regulations.

If you can’t see the feature on the program you currently use, get in touch with the provider to see if they can add it in for you.

When your business might be exempt

If your business doesn’t pay contractors you won’t need to complete a TPAR, but you will still need to submit a related Not Required to Lodge form.

There are also some circumstances in which you won’t be required to lodge a TPAR.

These are based on how much income your business receives from the services in the industries being targeted. Take a look at this ATO web page for further information.

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced tax agent as each small business’ circumstance will vary for End of Financial Year.