Australian Taxable Payments Reporting - Building and Construction Industry

 The ATO has released guidance for businesses in the building and construction industry subject to the reporting regime commencing from 1 July 2012. From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. It says the businesses need to report payments to the ATO in a “Taxable payments annual report”.

The ATO says the taxable payments annual report is due on 21 July each year and can be lodged in paper form or online. For the 2012-13 year, the ATO says businesses who lodge quarterly activity statements may lodge the taxable payments annual report by 28 July 2013 as it is the first year of the regime.

The annual reporting regime for payments made to Australian business contractors in the building and construction industry was first announced in the 2011-12 Budget.  According to the Government, the ATO had identified a high level of non-compliance by contractors in the industry. This includes issues with complying with GST requirements, Australian record-keeping requirements, and the personal services income rules. Other issues include businesses engaging contractors that may actually be employees, incorrect reporting of ABNs, and involvement in the “cash economy”.

The aim of the reporting regime is to improve compliance with taxation obligations of contractors in the industry by providing the ATO with sufficient information to allow data-matching for review and targeted audits.

What is required to be reported?

Currently, the requirements are only an "Exposure Draft". But that is all we have to prepare for the regime coming into effect from 1 July 2012.

Based on the exposure draft, businesses are required to report actual payments made on an annual basis to contractors that are providing building and contraction services. 

Affected businesses will not be required to report on payments to contractors for goods only. However, the supply of both goods and building/construction services, provided the services are not merely incidental to the supply of goods, will be reportable.

The following details will now need to be gathered so that they can be reported:

·         The contractor's name or legal entity

·         The contractor's ABN

·         The contractor's address

·         The total amount paid or credited to the contractor over the income year

·         Whether any GST has been charged

What to plan for?

You need to look for experience Australian Business Advisor.

You need to start gathering all your contractor details now.

You need to inform them that their income will be reported.

Our understanding is that the major accounting suppliers will integrate ATO reporting requirements into their products, which hopefully will alleviate some of the admin burden.