Tax Payments Reporting System Extended to the Cleaning & Courier Industries

Under the taxable payments reporting system (TPRS), businesses are required to report payments they make to contractors to the ATO.

This was introduced to improve tax compliance in the building and construction industry. As part of the 2017/18 Federal Budget, the Government announced that it would extend the TPRS to the cleaning and courier industries, which applies from 1 July 2018.

Entities with an ABN in these industries are required to report contractor payment details in the income year they were made.

This includes the total gross payments and GST paid to each individual contractor alongside their name and ABN. The reporting rules are not limited to payments to individuals so a contractor can be a sole trader, company, partnership or trust.

This aims to reduce tax evasion because the ATO can use data matching to detect understated income by the contractor.

When do payers need to lodge the total payments report to the ATO?

Payments must be reported to the ATO each year using the Taxable payments annual report.

Those entities that are required to report must therefore start collecting information from 1 July 2018. The report includes all payments that were actually made in the 2019 income year (cash basis).

This means that payments made on or after 1 July 2018 for invoices issued prior to this date must be included on the 2019 report.

Also, any unpaid invoices at year-end should not be included in the annual report for that income year. The due date for the first annual report has been extended to 28th August 2019.

The ATO also has the right to apply penalties where an entity does not comply with these reporting requirements.

What information must be reported to the ATO for each contractor?

The details to be reported for each contractor using the Taxable payments annual report include the following:

  • The payee’s ABN
  • The payee’s name and address
  • The gross amount and total GST paid for the income year

Depending on whether the report is lodged by paper or electronically, the ATO may require additional information such as the contractor’s phone number, email address and bank account.

Generally the information to be reported to the ATO can be obtained from the invoices issued by the contractors engaged.

What payments are excluded from the report?

The following payments are not required to be reported to the ATO:

  • Payments for materials only
  • Unpaid invoices at 30 June each year
  • Payments subject to PAYG withholding (wages)
  • Payments made within the same tax consolidated group
  • Payments made by individuals for private or domestic purposes

How is the information collected and lodged to the ATO?

Contractor payment details can be tracked through accounting software such as Xero and MYOB.

When setup correctly, the Taxable payments annual report can be prepared efficiently through the software and lodged to the ATO electronically.

If your business is in the cleaning, construction or courier industry and hires contractors then this report might apply.

Please call our office if you want to discuss your business reporting obligations.

We can also review your accounting software to make sure it’s setup correctly to collect contractor payment information by 1st July 2018.