Tax Payments Annual Report, otherwise known as TPAR, is a specific report that must be lodged by businesses to the Australian Taxation Office (ATO) detailing payments your business has made to contractors in specific industries. This includes submitting information on the contractor’s ABN, name, address and the gross amount paid to the contractor including GST. This includes sub-contractors, consultants and independent contractors who could be either sole traders, partnerships, trusts or companies.
Why do I need to lodge a TPAR?
Lodging a TPAR is a way for the ATO to accurately track whether contractors are reporting their earnings correctly and thus, whether they are correctly paying the right amount of tax. This will assist the ATO in identifying any contractors who are either not reporting their income or under-reporting their income.
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Does my business need to submit a TPAR?
Below is a list of industries that are required to submit a TPAR:
- Building and construction services
- Cleaning services
- Courier services
- Road freight services
- IT services
- Security, investigation and surveillance services
If your business provides any of the above services, you will be required to lodge a TPAR. The ATO website provides some great information on how to determine whether you need to submit a TPAR for each industry.
If your business offers one or more of the above list of services, you still may need to lodge a TPAR. To do this, you’ll need to calculate what percentage of payments you receive are for each service for the financial year period of 1 July – 30 June the following year. If the total payments received for each specific service is 10% or more of your GST turnover, you must lodge a TPAR. If you are uncertain, you can still lodge a TPAR. The ATO provides a great example of this:
Example: A business providing cleaning and other services
Jehan and Bhuvan Building Services (JBBS) has an ABN and provides a range of building maintenance services, including office cleaning.
They use both employees and contractors to perform the office cleaning work.
Their business has been operating for the full financial year so they can use their current GST turnover rather than work out a projected GST turnover amount.
They work out the following amounts for the 2018–19 financial year:
- current GST turnover for JBBS = $100,000
- total payments received by JBBS for cleaning services = $10,000
- total payments JBBS paid to contractors = $5,000
- total payments JBBS paid to employees = $6,000
To work out if they need to lodge a TPAR, JBBS perform the following calculation:
$10,000 (Total payments received for cleaning services) × 100 divided by $100,000 (Current GST turnover) equals 10%
JBBS have determined they must lodge a TPAR as the payments they received for cleaning services ($10,000) represent 10% of its total GST turnover for that year ($100,000).
They need to report the total amounts (adding up to $5,000) that they paid to each of their contractors for cleaning services in their 2018–19 TPAR. They don’t include the $6,000 for payments made to their employees because the TPAR is for reporting payments to contractors only, not employees.
How and when do I need to lodge my TPAR?
If you’ve determined that your business needs to lodge a TPAR, there are two methods to lodging this:
- Online – using your business software (such as Xero) or on the ATO Business Portal. However, you must have an AUSKey or MyGov account
- Paper form
Alternatively, you can have a qualified accountant to lodge this for you.
All lodgements must be made no later than 28 August each year.
Not Required to Lodge Form
If you’ve worked out that you don’t need to lodge a TPAR, you can lodge this form so that the ATO can update their records and avoid unnecessary follow-up. Below are a set of conditions for each industry that permits you to lodge this form:
- business providing building and construction services but:
- you’re no longer primarily in the building and construction industry, or
- you didn’t pay contractors for building and construction services.
- business providing cleaning services but:
- the total payments you received for cleaning services for the financial year is less than 10% of your current or projected GST turnover, or
- you haven’t paid any contractors for cleaning services.
- business providing courier services but:
- the total payments you received for courier services for the financial year is less than 10% of your current or projected GST turnover, or
- you haven’t paid contractors for courier services.
- government entity that:
- is a federal, state or territory government entity and didn’t make payments to an entity wholly or partly for providing services and didn’t pay grants to people or organisations that have an ABN, or
- is a local government entity and didn’t make payments to an entity wholly or partly for providing services.
This form is required to be lodged each financial year as you should be re-assessing whether you are required to lodge a TPAR each new financial year period. This form can be accessed here.
It’s important to understand that if your business falls under any of the industries set out above, then you must be careful in ensuring that you are lodging either a TPAR or a not-required-to-lodge form. Depending on your business and whether you’re providing mixed services in a specific industry or perhaps you don’t pay for contractors at all, you must accurately determine this before lodging. If you are uncertain or need a second opinion, you can book a free 45-minute initial consultation with one of our Chartered Accountants at Box Advisory Services.
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to contractors and small businesses. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek your own advice for any legal or tax issues raised in your business affairs.