From 1st July 2012, businesses in the building and construction industry are required to report annually to the ATO all subcontractors that provide building services. The report is aimed at capturing services (labour) provided, rather than goods. If a contractor supplies both goods and services, then whether the contractor is included in the report is governed by the percentage of services to goods supplied.
Who Has to Report?
Any business is required to report if ALL the following 3 conditions apply:
- You’re a business that is primarily in the building and construction industry, which means if any of the following apply:
a. 50% or more of your business income is derived from provided business and construction services.
b. Current financial year, 50% or more of your business activity relates to building and construction services.
c. Previous financial year, 50% or more of your business activity relates to building and construction services.
- You make payments to contractors for building and construction services.
- You have an ABN.
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.
The purchaser, or business engaging contractors, is required to provide a report for the entire year’s transactions, from 1 July to 30 June. Only invoices that have been paid for are included on the report. The report is due annually by 28th August.
Defined Building Activities and Services
There is an extensive list of services that are required to be reported in the TPAR. For the full list see ATO Taxable Payments Reporting.
Examples of Defined Building Activities
Alteration, assembly, construction, design, excavation, management of building and construction services, modification, removal and repair.
Examples of Defined Building Services
Architectural work, bricklaying, communications construction, drainage work, fencing, gas plumbing, installation of tanks, roofing and guttering, swimming pool construction and waterproofing.
- A paint store provides paint to painters in the building industry as well as an in-house painting service. For a small additional service fee the store will tint the paint to the colour the painter instructs. As the provision of the tinting service is merely incidental to the supply of the paint, the painter will not be required to report the payment it makes to the paint store.
- An electrical business provides goods and services for various electrical applications. A builder pays the business for the supply and installation of wiring in a commercial fit out that he is managing. As the provision of the installation service is a building and construction activity is the major part of the cost of the job, the builder will be required to report the payment it makes to the electrical business.
- The determining factor is the % of supply of goods compared to the % supply of building services; therefore as the electrician’s main supply is services and only a small portion of goods, it is reportable; whereas the painter’s main supply is paint (goods) and not services and therefore his payment is not reportable.
What has to be Reported?
- 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.
Lodgement of TPAR
Tax agents and BAS agents can advise, prepare and lodge the Taxable Payments Annual Report. Business owners can also prepare and lodge the report directly. A bookkeeper can assist the owner to prepare the report but may not lodge the report directly.
The form must be lodged either electronically or via the ATO paper form by 28th August.
Note that you CANNOT lodge the following media forms: spreadsheets, word documents, PDFs, CD-ROM, DVD or USB.
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