Taxable Payment Annual Report
The Taxable Payments Annual Reporting system commenced on 1st July 2012 for businesses in the Building and Construction industry. Businesses in this industry are required to report, to the ATO annually, all payments to suppliers/subcontractors who provide building services.
Who has to Report?
A business that has more than 50% of their activity or 50% of their income for the current or prior year in the building and construction industry, including sole traders and contractors, are known as ‘purchaser/s’. If they hire a subcontractor ‘supplier’ to provide building services the purchaser is required to report the subcontractor payments to the ATO annually.
TPAR applies to business-to-business transactions made in the Building and Construction Industry. It does not apply to private individuals engaging a subcontractor for building services. Note this is an obligation on the ‘purchaser/payer’ and no new obligation has been created upon the ‘recipient/supplier’. They should already be reporting the receipts on their BAS and income tax returns).
The purchaser, or business engaging contractors, is required to provide a report for the entire year’s transactions, from 1 July to 30 June. The report is due annually by 28 August.
Building Services extends across a wide range of building and construction activities.
What has to be Reported?
The report requires:
• Contractor’s name (that appears on the invoice the contractor provided)
• Contractor’s ABN
• Contractor’s address
• Total amount paid or credited to the contractor over the income year
• Amount of any goods and services tax (GST)
The purchaser is not required to supply a notice to each supplier of the amount of income and GST, reported to the ATO.
The process differs in each software package.
The main principles are that relevant contractors are flagged and the system captures all the required information (listed above).
If a contractor has a Voluntary Withholding Agreement in place, there is no need to report the contractor on the TPAR. Their payments will be captured in the payment summary issued to them at the end of financial year.
The report is prepared on a cash basis, even if the company reports their BAS on an accrual basis. Only contractor invoices that have been paid are required to be reported in that financial year.
TPAR extends to Government Grants and Payments
From 1 July 2017 government entities at federal, state, territory and local levels will need to report total payments made to a business for providing services. Government entities at the federal, state and territory levels will also need to report total grants paid to entities with an ABN.
The new law applies to the payer i.e., the Government, but will impact the receiver of such payments. The first report will be due on 28 August, 2018. Certain types of government entities are exempt from reporting, as are certain transactions. For more information refer to ATO website.