The Taxable Payments Annual Report (TPAR) was designed to supress, if not outright eliminate the “black economy” by requiring businesses providing various services to lodge a report containing details of payments made to contractors or subcontractors. This year, the ATO has identified around 60,000 businesses that have not compiled with the lodgment requirements. It notes many businesses that have engaged delivery services (including food delivery services) though a contractor/subcontractor may not know that they have to lodge a report.
The ATO has reminded businesses that provide various services to lodge their Taxable Payments Annual Report (TPAR) for the 2019-20 income year. It estimates that around 280,000 businesses were required to lodge a TPAR for the 2019-20 financial year, and around 60,000 businesses still have not complied with the lodgment requirements under the Taxable Payments Reporting System (TPRS). The reports were originally due on 28 August 2020, to avoid penalties businesses are encouraged to lodge as soon as possible.
“It’s not fair if an honest business misses out on sales because a competitor is under-cutting them by doing things like under-declaring or not declaring income. The information we receive in the taxable payments annual report helps us shed light on this and keep things fair.” – Assistant Commissioner Peter Holt
The TPAR was introduced to combat black economy which is estimated to cost the Australian community around $50bn or 3% of GDP. It is designed to help the ATO identify contractors or subcontractors who either don’t report their income or under-report their income. While it originally only encompassed the building and construction industry, it is now required for any businesses that make payments to contractors/subcontractors and provides any of the following services:
- building and construction including plumbing, architectural, electrical, plastering carpentry, engineering and a wide range of other activities;
- cleaning services including interior and exterior cleaning of structures, vehicles, machinery and cleaning for events/COVID-related matters;
- courier services including delivery of items or goods (ie letters, packages, food etc) by motor vehicle, bicycle or by foot;
- road freight services including transportation of freight by road, truck hire with driver, and road vehicle towing services;
- IT services including writing, modifying, testing or supporting software either on site or remotely; and
- Security, investigation or surveillance services including patrolling and guarding people, premises or property, watching or observing an area or security systems etc.
Remember, your business does not need to provide the above services exclusively to be captured under the TPAR system, if you only provide the service for a part of the year, or even if it is only a small part of your business, you may be required to lodge a TPAR. According to the ATO, if the total payments received from the provision of any of the above services equal or exceed 10% of your total annual business income, you’ll be required to lodge a TPAR.
For example, during COVID, many eateries, grocery stores, pharmacies and other general retailers pivoted to providing home delivery for their customers. As such, they may have needed to engage contractors or subcontractors to provide courier services, if the total payments received for these deliveries or courier services amount to 10% or more of their total business income, they will be required to lodge a TPAR even though they may not have needed to do so previously.
If your business is required to lodge a TPAR, the details you’ll need to report about each contractor should be easy to find and are generally contained on the invoice you receive from them. This includes details such as their ABN, name and address, and the gross amount paid for the financial year (including GST).
Need some help?
Think your business may needed to lodge a TPAR ASAP? If you’re not sure or if you just need some help in lodging the report or any other matters, we have the expertise to help you. Don’t delay, contact us to get the wheels in motion to avoid any potential penalties.