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Completing The New Taxable Payments Annual Report

New reporting requirements

The Government has introduced regulations requiring businesses in the building and construction industry to report payments made to contractors annually.

The information reported about payments made to contractors will be used for data matching to find out who is engaging contractors and to detect contractors who have not:

  • Lodged tax returns
  • Included all their income on tax returns that have been lodged.            

Who needs to report?

You will need to comply with the new reporting requirement if you:

  • Are a business that is primarily in the building and construction industry, for more information see: http://www.harrisblack.com.au/white_papers/examples_of_building_and_construction_services
  • You are 'primarily' in the building and construction industry if you earned more than 50% of your income from 'building and construction services' in the current or previous financial year.
  • Make payments to contractors for building and construction services, and
  • Have an Australian Business Number (ABN).

If you fit the above criteria you are required to report payments and must prepare and lodge an annual report each year, the first one being due on July 21, 2013 (covering the period July 1, 2012 to June 30, 2013).  Harris Black as your tax agent has a further extension to lodge until the 25 August 2013.

What payments need to be reported?

Payments made to contractors for services in the building and construction industry need to be reported. 

Building and construction services include the following activities performed on, or in relation to, any part of a building, structure, works, surface or sub-surface:

-  Alteration -  Improvement -  Management of building and construction services (i.e. project management, contract administration)
-  Assembly -  Installation
-  Construction -  Maintenance
-  Demolition -  Modification
-  Design -  Removal
-  Destruction -  Repair
-  Dismantling -  Site Preparation
-  Erection -  Organisation of building and construction services
-  Excavation
-  Finishing

Payments that don't need to be reported

Some payments that don't need to be reported on the Taxable Payments Annual Reports include:

  • Payments for materials only;
  • Unpaid invoices at 30 June each year.  Only invoices paid in each Financial year need to be reported;
  • Payments which are subject to Pay As You Go (PAYG) Withholding requirements (e.g. Payments to employees, workers engaged under voluntary agreement, workers engaged under a labour hire or on-hire agreement or contractors who don't quote an ABN)* The difference between an employer and contractor is explained further below.   

Employee or contractor?

Before you engage workers, you need to check whether they are employees or contractors by considering the facts or their working arrangements.

It is important that you get this right as you will need to meet different tax and super obligations depending on whether your workers are employees or contractors.

Details to determine if a worker is an employee or contractor can be found here: http://www.harrisblack.com.au/white_papers/contractors_vs_employees__under_the_ato_spotlight

Payments to suppliers

You will need to remember to report payments made to suppliers in situations where you are paying for more than just a product.

If you are invoiced for goods and services, you should report the total amount of the payment unless the services are merely incidental.

If you are only purchasing goods then no reporting is required.

Example 1:
You hire an excavator with an operator.  You will have to report the payment made to the hire company.

Example 2:
Your company buys a load of timber for a deck which you are constructing.  You do not need to report the amount paid for the timber.

Information you need to gather

For each contractor, you are required to report the following information each financial year:

  • Australian Business Number (ABN) if known
  • Contractor's name and address
  • The gross amount paid for the financial year (this is the total paid including any GST)
  • The amount of goods and services tax included in the gross (total) amount paid.

The details you need to report will usually be contained in the invoices you receive from your contractors.

You are only required to report payments in the financial year in which the payment is made.

Some accounting packages may have already collated this information for you.

How to report?

You report this information by lodging the Taxable Payments Annual Report form using the following methods:

1.    Paper - You can order a paper form online or by calling the ATO on 13 28 66. To view an example of this form click here: http://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/BUS16191n3447.pdf

2.    Through Harris Black as your Tax Agent.  For more information contact your Harris Black team member.

3.    Using the Business Portal if your accounting software can produce a report which meets ATO specifications.  To check if your accounting software meets the ATO's requirements visit the ATO website.

Please remember to report the total amount paid to each contractor during the financial year not each individual payment.

 

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