Businesses who make payments to contractors in relation to certain services may be required to prepare and lodge the Taxable payments annual report (TPAR) which is due for lodgment by 28 August 2020.
The TPAR was introduced by the Australian Taxation Office (ATO) to ensure contractors within certain industries comply with their taxation requirements. This puts the responsibility on businesses who employ contractors to report payments to them as part of their ever expanding data matching programs.
Businesses who provide any of the following services may be required to prepare the TPAR:
- Building and construction
- Cleaning services
- Courier services
- Road freight services
- Information technology services
- Security, investigation or surveillance services
- Mixed services (provides one or more of the services listed above).
The category of businesses who may be required to comply with these reporting obligations is fairly broad. You could have these obligations even if any of the above services are not necessarily your primary business and may be an ancillary service you provide to your customers. With the impact of COVID-19 making businesses expand their services (eg. to include deliveries) or forcing them to venture into other industries, businesses may be caught by these reporting obligations.
Courier services
Courier services include delivery of goods including parcels, packages and food. Although businesses may only provide courier services as an ancillary service, they may be captured within these reporting obligations if 10% or more of their GST turnover is derived from delivery services.
The low 10% threshold means this could potentially apply to various businesses who have had to provide delivery services during COVID-19 as a result of the lockdown and careful consideration will need to be given to the income generated as a result of these services.
These obligations will not apply to businesses where delivery is the only method of receiving your goods, however if you allow a “pick up” option, this exclusion will not apply. This is explained in the following example provided by the ATO:
Example: A business providing food delivery services to restaurants
Immediate Food Pty Ltd is a company with an ABN that picks up and delivers food from restaurants to customers. Customers contact the restaurant directly to place orders and the restaurant then uses delivery drivers subcontracted by Immediate Food to undertake deliveries. Immediate Food charges their client restaurants for the services they provide.
Does Immediate Food Pty Ltd have to report?
As Immediate Food is delivering the food to customers on behalf of the restaurants, it is supplying a courier service.
At the end of the financial year, if the total payment they receive for courier services is 10% or more of their current GST turnover, Immediate Food will have to report the total payments they make to each of their subcontractor drivers for courier services in a TPAR.
Do the restaurants that partner with Immediate Food Pty Ltd have to report?
The restaurants that partner with Immediate Food are offering their take-away customers a choice of picking up their order from the restaurant or having it delivered to them (via Immediate Food). As a result of this, the restaurants are also supplying courier services when they deliver customer orders via Immediate Food.
At the end of the year, if the total payment they receive for courier services is 10% or more of their current GST turnover, these restaurants will also need to lodge a TPAR to report payments they made to Immediate Food. |
Using the example above, if Immediate Food is required to lodge a TPAR, only the payments to contractors that provided the courier services would be included. Other contractors who supply services other than courier services, would not need to be reported in the TPAR.
Building and construction
Businesses who primarily provide building and construction services are required to meet these reporting obligations. The ATO has kept the definition of these services broad and include various activities including (but not limited to) architectural, engineering, landscaping services etc.
Essentially, you will be required to prepare and lodge the TPAR if:
- 50% or more of your income is earned from providing building and construction services during the current or previous income year; or
- more than 50% of your business activities relates to these services during the current income year.
Reporting requirements
If your business falls within these reporting requirements, you will be required to report the total payments made to contractors used in providing these types of services during the year.
The following do not need to be reported in the TPAR:
- Payments for materials only
- Payments for incidental labour
- Unpaid invoices as at 30 June each year
- Payments subject to PAYG withholding
- Payments within consolidated groups
- Payments for private and domestic services.
For more information on this topic, contact your Moore Australia advisor today.