TABLE OF CONTENTS
- What is TPAR (Taxable payments annual report)?
- Why is TPAR important?
- What is defined as a contractor for TPAR purposes?
- Which industries need to submit a TPAR?
- What details do you need to include to report TPAR correctly?
- How do you lodge TPAR?
- Record keeping and TPAR
- Do all payments need to be reported in your TPAR?
- Where to get help with TPAR
Depending on your industry, and whether you hire contractors, there’s a chance that you may need to file a Taxable payments annual report.
So, what’s a TPAR? Who needs to file one? What’s the point exactly?
Let’s dive a little deeper into taxable payment reporting.
What is TPAR (Taxable payments annual report)?
A Taxable payments annual report is essentially used to report contractor payments made by businesses and government entities.
Your TPAR is simply filed once a year with details on how much you paid your contractors and who they were.
The main function of TPAR is to ensure that both contractors and the businesses that hire them report the same income/payments in order to combat misreporting to the Australian Tax Office (ATO).
Why is TPAR important?
The TPAR was introduced in 2012 to make sure Australian contractors were correctly reporting income to the ATO.
When businesses and government entities hire a contractor for a job, that business will report payments and other reportable information such as GST to the government.
The contractor themselves will report income and GST through their normal tax obligations such as tax returns. If the contractor reports differently than the business who hired them, the ATO knows there’s a discrepancy that needs investigating.
In extreme circumstances, a Taxable payments annual report can help identify those contractors who are attempting to either under report income or not report it all (usually to avoid tax). In other cases, it simply reduces errors and misreporting by shedding more light on contractor’s financial behaviour.
What is defined as a contractor for TPAR purposes?
A contractor for the sake of TPAR can include consultants, subcontractors, and independent contractors. These contractors can either operate as sole traders, companies, partnerships, or trusts.
These contractors can work for government entities or Australian businesses.
Which industries need to submit a TPAR?
There are a range of industries required to file a Taxable payments annual report every year. This can apply to a government entity or Australian business. The criteria hinges upon both on your industry and of course, whether or not you hire contractors in these industries.
Some key industry groups who need to file TPAR include:
· Building and construction services
· Cleaning services
· Courier services
· Information technology services
· Freight services
· Securities, investigation, or surveillance services
If you’re unsure if you need to file a TPAR, check with the ATO.
What details do you need to include to report TPAR correctly?
To ensure you submit your Taxable payments annual report correctly you first need to remember the due date – 28 August each year.
Beyond that you’ll only need the following information:
· The contractor’s Australian business number
· The contractor’s name and address
· The gross total you paid them (including GST) for the financial year.
How do you lodge TPAR?
Lodging TPAR is pretty straightforward.
The best way, and the most pain free, is to use SBR (standard business reporting) enabled software – such as your accounting software. Any good quality accounting software should have a TPAR feature.
Alternatively, you can use the ATO portal to lodge your TPAR.
If you’re old school, you can also lodge an original paper form by mail.
Record keeping and TPAR
Of course, you can only submit TPAR if you’ve kept accurate records. Make sure you log every payment to contractors in your accounting software or record keeping system. Furthermore, ensure you keep digital copies of all invoices and receipts to back up your records.
You should be doing this anyway for your own bookkeeping and accounting, but keep in mind that you’ll need it for yearly TPAR lodgement.
Do all payments need to be reported in your TPAR?
Not necessarily. Many contracted services in the previously mentioned industries need to be reported. However, other incidental acts of labour do not. Let’s make it a bit clearer.
What payments need to be included?
If you make any payments to contractors in the industries mentioned above (construction, cleaning, IT, courier, freight, and securities) you need to report these payments, including labour and materials.
What payments do not need to be included?
You do not need to report:
· Incidental labour
· Payments made for materials only
· Payments to foreign contractors
· Payments made to contractors without ABNs
· Workers under a labour hire or on-hire arrangement
· Payments within consolidated groups
Where to get help with TPAR
Your fist port of call for all things TPAR is the ATO website.
Beyond this, it’s extremely helpful to reach out to your local bookkeeper or accountant to help you navigate the process involved and to advise you on the how and why of it all, including lodgement and record keeping.
