Taxable payments annual report (TPAR). Do you need to lodge one?

If your business makes payments to contractors or subcontractors, this may apply to you. Some businesses in the below-detailed industries may need to lodge a Taxable payments annual report. Known as a TPAR it must be lodged by 28 August each year if it applies.

The taxable payments reporting system aims to create a level playing field. It is intended to prevent dishonest operators from gaining an unfair advantage over the majority. The information that is collated in the TPAR allows the ATO to identify contractors who are not meeting their tax obligations.

You need to know about TPAR if your business provides any of the following services. This is the case even where the service detailed is just part of the services you provide each year:

  • building and construction services – this category is very broad. It includes plumbing, architectural, electrical, plastering, carpentry, engineering and a wide range of other activities. You can visit the ATO website for full list, Examples of building and construction services
  • cleaning services – this category includes interior and exterior cleaning of structures. It also covers vehicles, machinery and cleaning for events
  • courier services or road freight services – this includes delivery of items or goods. That includes parcels, packages, letters, and food if they are delivered using a motor vehicle, bicycle, or by foot. Also included are the transportation of freight by road, truck hire with driver, and road vehicle towing services
  • information technology (IT) services – this includes writing, modifying, testing or supporting software to meet a client’s needs. This applies whether the modifications are carried out on-site or remotely using the internet
  • security, investigation or surveillance services – this includes patrolling and guarding people, premises or property. This can be from an observation area or monitoring security systems. The investigation must be specifically related to security and surveillance. It does not apply if you are merely gathering information

The TPAR details payments made to contractors for providing services to your business.

Contractors can cover a number of disciplines, and these include:

  • subcontractors,
  • consultants
  • independent contractors.

The company structure they have does not affect if they are included. They can be operating as sole traders (individuals), companies, partnerships, or trusts.

The details you need to report about each contractor are generally found on the invoice you should have received from them. This includes:

  • their Australian business number (ABN), if known
  • their name and address
  • gross amount you paid to them for the financial year (including any GST).

The information below shows what to consider when working out if you need to report. It depends entirely on the services you provide.

Building and construction (B&C)

Either:

50% or more of business income is from B&C services, or

50% or more of business activity is B&C services.

An example would be where a building company’s total business income for the year is made up of:

35% from carpentry services

35% from construction project management services

30% from AFL umpiring.

Throughout the year, the business makes payments to contractors for plumbing, roofing, demolition, carpentry, concreting, architecture work.

The total payments for B&C services equals 70%.

Report all payments made to contractors providing any of the B&C services.

Cleaning

10% or more of business income is from cleaning services.

See the ATOs three-step guide to work out if you need to lodge for cleaning services.

A business provides:

  1. building maintenance services
  2. carpet cleaning services.

For the financial year their:

total business income = $100,000

total income received for cleaning services = $12,000

They pay contractors to provide the carpet cleaning on their behalf.

12% of the business income is from cleaning services.

Report the payments to contractors for the carpet cleaning services.

Courier or road freight

10% or more of business income is from courier and road freight services.

Courier services include delivery.

A pizza shop provides:

take-away sales

home delivery, $4 charge per order.

For the financial year:

Total business income is $200,000.

Delivery charges are $25,000

They pay contractors to make deliveries.

12.5% of business income is from courier services.

Report the payments to contractors for delivery services.

Information Technology (IT)

10% or more of business income is from IT services.

See the ATOs three-step guide to work out if you need to lodge for IT services.

A business provides:

  1. network design and implementation
  2. supplies and installs network hardware
  3. ongoing technical support.

They pay contractors to provide ongoing technical support.

For the financial year:

total business income = $800,000

total income received for IT services = $650,000.

81% of business income is from IT services (network design and implementation and technical support).

Report the payments to contractors for IT services.

Security, investigation, or surveillance

10% or more of business income is from security, investigation, or surveillance services

A business provides:

  1. security for events
  2. after hour monitoring and patrolling for business premises

They pay contractors for security at events and occasionally for patrolling.

100% of business income is from security, investigation or surveillance services.

Report all payments to contractors for security, investigation, or surveillance services.

If this is all news to you, maybe now is the time to speak to a bookkeeper or an accountant to establish if you fall into the bracket that needs to report.

The penalties for not doing so are much higher than the fees that a bookkeeper like Liz and her team at Keeping Numbers will charge you.

You can call Liz on 0405 801 119 or email her here.

Other blogs you might enjoy...