A guide to taxable payments annual report
What is a taxable payments annual report (TPAR)?
Some businesses and government agencies who make payments to contractors may need to report these payments by lodging a taxable payments annual report (TPAR) with the ATO. Some government entities must file a TPAR to report grants they award to people or organisations.
What is the purpose of a TPAR?
The Australian Taxation Office developed TPAR reporting to prevent contractors from either not reporting or under-reporting their income.
Which businesses must lodge a TPAR?
If you operate a business that has an Australian Business Number, and you employ contractors to fulfil services essential to your business, you may be required to lodge a TPAR.
Business sectors that may need to file a TPAR for payments to contractors include:
building and construction
security, investigation or surveillance.
Most businesses that hire contractors need to lodge a TPAR if they earn at least 10% of their total income from their services. The exception to that rule is building and construction businesses, which need to lodge a TPAR only if they earn 50% or more of their income from the services of contractors.
Here are a few examples that illustrate how TPAR rules apply:
Example 1: Your construction company secures a contract for building a new shopping centre. You employ contractors to perform the work and therefore must report those contractor payments on your TPAR.
You also hire an independent accountant to manage your books. Because the accountant is providing a professional service that’s not part of the building and construction sector, you don’t need to report the accountant’s fee on your TPAR.
Example 2: Your company provides commercial cleaning services and uses contractors and full-time employees. While you don’t need to report employee wages on a TPAR, you do need to report all payments to contractors.
What payments aren’t subject to TPAR requirements?
You must report all contractor payments for labour and for materials essential to that labour. You don't need to report the following:
“Incidental” labour is work that’s outside the scope of essential services. For example, if your construction company rents a piece of work equipment from a contractor, and the contractor charges a fee for delivery, that fee is “incidental.” If the contractor also operated the equipment for you on the job site, you'd need to report payment for that service on your TPAR.
If a contractor invoices you before the end of the financial year, but you haven’t issued payment by June 30, you don’t need to report that payment until the following year.
Payments to labour-hire firms
If you retain the services of a labour-hire firm, it manages all pay, tax and reporting requirements for its employees.
Payments to foreign residents
Payments to foreign contractors working in Australia are usually subject to PAYG withholding, so you don’t need to report those payments on your TPAR, nor do you need to report payments to foreign residents working overseas.
Payments to contractors that don’t have an Australian Business Number
If a contractor doesn’t provide an ABN, you may need to withhold PAYG contributions and report their pay through the PAYG payment summary (Form NAT3448).
Payments to a fellow member of a consolidated group
If your business has partnered with another business in a consolidated group, you don’t need to report payments between your two businesses. That’s because the consolidated group pays taxes as a single entity. You'd only need to report payments to contractors outside your consolidated group.
How to lodge taxable payments annual report
To prepare your TPAR, you’ll need the name, address and ABN for all contractors you hired and the amount you paid them, including GST.
If you have Standard Business Reporting (SBR) software, you can use the file transfer feature to lodge your TPAR digitally. Otherwise, you may use the ATO’s online portal, if you have a myGovID account and Relationship Authorisation Manager.
Businesses may also file a paper TPAR by mail, but it must be the original completed form and not a copy.
Note: TPAR lodgement is due by 28 August each year.
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