TPARs were introduced by the Australian government in 2014 for building and construction businesses, in an effort to improve tax compliance in the sector. The legislation requires businesses to report the total payments made to each of their contractors within the financial year. The regime now also extends to cleaning and courier services in an effort to bring into line reporting of salary or wages paid to employees in these industries.
You are considered to be a business that is primarily in the building and construction industry if;
- For the financial year, 50% or more of your business income came from providing ‘building and construction services’
- 50% or more of your business activity related to ‘building and construction services’
- In the financial year immediately before the current financial year, 50% or more of your business income came from providing ‘building and construction services’
A contractor can be a sole trader, company, partnership or trust. If your business doesn’t pay contractors, you won’t need to complete a TPAR, but you will still need to submit a ‘Not Required to Lodge’ form. Additionally, there are some other circumstances in which you won’t be required to lodge. You can find out more on the ATO website here or contact Tradies Accountant for a chat.
The ATO requires taxpayers to report on payments made to contractors for building and construction services, cleaning or courier services from 1st July 2018 to 30th June 2019. For each contractor, you must provide the following details;
- Contractor’s Name
- Contractor’s Address
- Gross amount paid to the contractor for the financial year (this is the total paid including any GST)
- The amount of GST included in the gross (total) amount paid to the contractor.
The details you need to report are normally contained in the invoices you receive from your contractors.
You can find valuable information on what occupations and activities are covered by the TPAR regime on the ATO website here.
The main thing to note is that if you’ve received an invoice that includes both labour AND materials you need to report the whole amount, unless the labour component is incidental.
You don’t need to report on the following;
- Payments for building supplies or materials only
- Maintenance of equipment or tools
- Unpaid invoices as of June 30 of the financial year you are reporting upon. The ATO requires taxpayers to report on a cash basis.
- PAYG withholding payments
- If you are a homeowner paying for building and construction services to contractors on your own home
TPAR filing can be complex and time consuming. Tradies Accountant can work with you to identify which of your contractors you need to report, and what information needs to be provided for each. We can take the burden away by preparing and lodging the annual report on your behalf, so you can concentrate on doing what you do best.
DISCLAIMER: All information provided in this publication is of a general nature only and is not intended to be financial advice.