As part of its ongoing campaign against shadow economy behaviour, the Australian Taxation Office (ATO) has declared that it is putting those contractors that are trying to keep their income ‘off-the-books’ on notice, alongside the businesses that are helping them do so.
The ATO is making use of the taxable payment reporting system (TPRS) to monitor such misconduct among contractors, which includes those that are operating cash-in-hand as a way to avoid paying tax.
The ATO say that around $350 billion in payments made to 950,000 contractors were reported to the them in the last financial year. The agency expects more than 270,000 businesses will complete a taxable payment annual report (TPAR) for the financial year 2021-22.
The TPAR was introduced in 2012 to ensure businesses in the building and construction industry are reporting their income and are paying their fair share of tax. TPRS obligations apply to businesses in the building and construction industry, as well as businesses that provide cleaning, courier, road freight, information technology and security, investigation, or surveillance services and have paid sub-contractors in relation to these services.
The ATO uses information reported on the TPAR to make sure that businesses are complying with their tax obligations, such as reporting the correct income, lodging business activity statements (BAS) and income tax returns, paying the right tax, being registered for GST if required, and using a valid Australian business number (ABN).
“The TPAR is just one tool in the ATO’s toolbelt, helping crack down on $11 billion a year in missing taxes and keeping things fair for those businesses and contractors doing the right thing,” ATO Assistant Commissioner Peter Holt said.
“The ATO has sophisticated data and analytics to identify businesses that fail to lodge a TPAR,” Holt added. “Not reporting payments to contractors may be seen as a red flag and will prompt closer scrutiny from the ATO on your own affairs as well as those of your contractors. Trying to ‘help out’ your contractors by not disclosing their payments is a great way of bringing attention on yourself.”
The ATO is reminding these businesses that they will have to lodge a TPAR by 28 August, setting out payments to their contractors. Businesses and tax professionals can view the data the ATO receives about their business, such as taxable payments reported under the TPRS, as a reported transaction in ATO Online platforms.
Businesses and tax professionals who are lodging on behalf of their clients may contact the ATO if they need additional time to lodge their TPAR.
“Our new reported transactions services can help businesses and their tax professionals to view their data to make it easier to meet tax obligations,” Holt said, adding that any payments reported to the ATO through TPRS by sole traders will be pre-filled in their tax return at tax time.
“If you’re a sole trader, any payments you received as a contractor that were reported in a TPAR will be available as a pre-fill information report into your tax return,” Holt said. “Whether you lodge your tax return yourself or through an agent, just remember to double-check the pre-fill information is complete and correct before lodging, especially as not all your income may have been reported to us previously.”
