The Taxable Payments Annual Report (TPAR) system acts as an integrity measure to ensure payments made to contractors are reported to the Australian Taxation Office (ATO) and is similar to the reporting of salary and wages payments made to employees. The TPAR system increases compliance as well as the ATO’s ability to use data matching to track payments being received by contractors in the industry.
Initially only covering the building and construction industry, from 1 July 2018 the TPAR system was extended to include the courier and cleaning industries. For businesses in these industries, your first annual report is due on 28 August, 2019.
From 1 July 2019, the reporting system was expanded further to include:
- security providers
- road freight
- Investigation & surveillance
Businesses in the above industries will need to ensure they collect information from 1 July 2019, with the first annual report required in August 2020.
Payments are reported on the Taxable Payments Annual Report (TPAR) due by 28 August each year (for payments made during the previous financial year) and penalties apply for not lodging the report by the due date.
Who needs to lodge a TPAR report?
You may need to lodge a TPAR by 28 August each year if you are a business which pays contractors and provides:
- Building and construction services – reporting has been required from 1 July 2012 (next report due 28 August 2019)
- Cleaning services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)
- Courier services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)
- IT services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)
- Security, investigation or surveillance services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)
- Road freight services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)
Note that contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.
For businesses providing mixed services, if 10% or more of GST turnover is made up of these reportable services, you may need to report. Examples of mixed businesses that may need to lodge a TPAR include:
- building maintenance
- franchisees and retailers
- event management
It’s also worth remembering that the definition of these industries can be quite broad so you may have to reassess whether you need to lodge a TPAR every year. You can find out more about how the ATO defines each industry here.
What information do you need to report on a TPAR?
The details you need to report about each contractor are generally found on the invoice you should have received from them. These include:
- their Australian business number (ABN),
- their name and address,
- the gross amount you paid them for the financial year (this is the total amount paid including GST), and
- the total GST included in the gross amount you paid.
If invoices you received included both labour and materials, whether itemised or combined, you report the whole amount of the payment unless the labour component is only incidental.
What payments don’t need to be reported on a TPAR?
- payments for materials only
- unpaid invoices as at 30 June each year – you report that in the following year’s TPAR
- PAYG withholding payments – these are reported separately
- payments for private and domestic projects – for example, payments you make for building or renovating your own home
- payments within consolidated groups
How do I lodge a TPAR?
- Using business software
Most accounting packages (including Xero, MYOB and Reckon) have the capability to complete and lodge a TPAR online though you may be required to do some initial setup to ensure the relevant data is being correctly captured.
- If you don’t have business software
If you don’t have business software that supports TPAR, you can still lodge online through the ATO online services for individuals and sole traders or through the ATO Business Portal ‘taxable payments online report’. For keeping a running tally of payments through the year you can use this ATO provided spreadsheet.
If your business engages contractors to deliver its services, now is the time to be speaking to your accountant to ensure that the right reporting mechanisms are in place. Speak to our team on 07 3023 4800 or contact us at email@example.com, to discuss how this will impact your business.
If you would like to read more on completing and lodging your TPAR, visit the ATO website.