Taxable Payments Reporting Scheme
The Taxable Payments Reporting Scheme (TPRS) requires business owners in the construction industry to report payments made to contractors during the year. This is done through a Taxable Payments Annual Report (TPAR). The scheme allows the ATO to data match payments to income, helping them identify discrepancies.
Initially the TPRS was introduced in 2014 and was targeted at capturing the black economy in the construction industry. The black economy refers to activities where people don’t report in the tax system or report incorrectly. The Government claimed the scheme generated income of $2.7 billion dollars in the 2015-2016 financial year, which would have otherwise been lost to the black economy.
Further to this, the black economy taskforce was formed in 2016 and provided recommendations on how to manage people incorrectly reporting their tax obligation. A total of 80 changes were recommended to the Government, with many being endorsed. One of the recommendations was to extend the TPRS, in the hopes that it reduces incidences of incorrect reporting.
The scheme has also been extended to other fields including businesses in information technology, cleaning, road freight, courier, security, and investigation and surveillance services. Courier and cleaning service businesses will need to lodge their TPAR for 2018/2019 by 28 August 2019. Information technology, road freight, security and, investigation and surveillance service businesses will need to lodge their TPAR for 2019/2020 by 28 August 2020, in effect having an extra year to prepare.
The best way to prepare for TPRS is to ensure you have adequate record keeping procedures in place. Normally, the information required for completion of the TPAR are contained in the contractors’ invoice. These details include their ABN, name (individual or business), address and gross payments (including GST and tax withheld). It is important to note the amount reported must be the invoice total, regardless of if an invoice was itemised for labour and materials. Contractors may operate as sole traders, partnerships, trusts or companies. You must ensure the contractors ABN is correct, and the ABN Lookup website is a great place to confirm details. By doing this simple check, it will minimise the chance of the ATO contacting you regarding errors in your TPAR.
If you don’t currently pay contractors, you are not required to complete a TPAR. Instead, you must submit a Not Required to Lodge form. In certain circumstances, where a businesses revenue generated from the industries targeted is below a threshold, the business will not be required to lodge a TPAR. If you are have any questions regarding the TPRS, contact your local team at The Great Bean Counters for further advice.