Your Guide To Lodging A TPAR Report
If your business makes payments to contractors or subcontractors, you may need to lodge a TPAR, or a taxable payments annual report - but where do you start?
In order to avoid the wrath of the Australian Tax Office, it’s crucial for all businesses big and small to first identify their tax obligations, and then in turn pay accordingly. After all, failure to do so could expose yourself, brand or business to hefty fines and even jail time.
However, it can be tricky to understand exactly which forms of businesses tax you’re obligated to pay, and when. Taxable payments to contractors are one of the key reporting obligations that small to medium size businesses need to pay attention to at the end of each financial year, particularly when it comes to lodging a taxable payments annual report - but what exactly is a TPAR?
The TPAR Reporting System Explained
In December 2016, the federal government established the Black Economy Taskforce to develop an innovative, multi-pronged policy response to combat these forms of cash income, otherwise known as the black economy in Australia. At the time, the taskforce estimated the economic impact of the black economy could be as large as 3% of GDP, or approximately $50 billion.
In turn, TPAR reports are one of the most valuable tools the ATO uses to combat under the table cash work conducted by specific industries and trades in Australia, or income that isn’t declared. According to the ATO, the taxable payments reporting system aims to create a level playing field amongst those doing business in particular industries.
As a result, the information collected in annual TPAR reports allows the ATO to then identify contractors who aren’t meeting their relevant tax obligations. Needless to say, completing these reports properly is hugely important if you want to avoid a hefty tax bill.
Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts. If your business conducts any of the following whilst using contractors, you may be required to lodge a TPAR report.
Building And Construction Services - Although this category is quite broad, it generally includes plumbing, architectural, electrical, plastering, carpentry, engineering and just about anything construction related that uses subcontractors or contractors to complete the work.
Cleaning Services - This includes both interior and exterior cleaning of either structures, vehicles, machinery, event spaces and in both residential and commercial settings when using contractors, and not paid employees.
Courier And Road Freight Services - Includes delivery of items or goods such as parcels, packages, letters and food by motor vehicle, scooter, bicycle or on foot, plus the transportation of freight by road, truck hire with driver and road vehicle towing services.
Information Technology (IT) Services - As a general rule, this includes writing, modifying, testing or supporting software to meet a client's needs, whether conducted on site or remotely through the internet.
Security Or Surveillance Services - Includes patrolling and guarding people, premises or property, watching or observing an area and monitoring security systems, and investigation specifically related to security and surveillance - not just information gathering.
Federal, state, territory and local government entities need to report the total payments they make to an entity, wholly or partly, for providing services. Additionally, federal, state and territory government entities will need to report the total grants paid to people or organisations that have an Australian business number (ABN). Local government entities don't need to report grants.
The details businesses need to report about each contractor are generally found on the invoice received from them. This information includes:
Their Australian business number (ABN) if known
Their name and address
Gross amount you paid to them for the financial year (including any GST)
Details of these payments and grants on the taxable payments annual report is due by 28 August each year, so if you think that you may need to lodge a TPAR report - time is indeed of the essence.
Sourcing Help With Lodging Your TPAR Report
Whether you’re starting a business, purchasing an existing one, or even reevaluating where your current enterprise stands - requires some form of financial know-how if you hope to successfully navigate your legal tax requirements as well as hitting your financial and business goals.
However, if understanding the legalities that surround your business or finances isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant in order to free up their time while knowing that their financial obligations are already taken care of by the professionals.
Ultimately, the team at Muro believe that every business owner is an entrepreneur. However, accounting does not discriminate - finances break down barriers and are not territorial. If you would like to take a deeper look into your finances, please get in touch with us at Muro today to ensure that you’re on the right path for success.