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Taxable Payments Reporting for the Building & Construction Industry

Recently I attended one of the free webinars presented by the ATO about the new Taxable Payments Reporting system that has begun as of today, July 1st 2012. I found it to be very informative and easy to follow. I highly recommend anyone who needs to know more about the new system, attend one of these webinars. Here’s hoping the ATO will produce many more webinars across a whole range of topics in the months to come – much easier attending a presentation from the comfort of your own office!

 The following is a summary of what was presented at the webinar:

Why has this new system been created?

The ATO wants to try to find out which contractors in the building & construction industry are not meeting their taxation compliance requirements via data matching. This system will enable them to do this more easily.

Who is the system for?

The new system is for any businesses in the building & construction industry who use contractors during all or any phases of the building process. This relates to both residential and commercial building projects. The type of business structure of the business is irrelevant here i.e. the system applies to sole traders, companies, trusts, partnerships etc.

Who doesn’t have to report?

Private owner-builders who are not business owners do not have to report payments to contractors to the ATO.

What has to be reported?

There is form to complete each year and the following items need to be reported:

The contractor’s ABN, name, address, the gross amount paid, the GST amount paid (if any).

What doesn’t need to be reported?

1. Materials-only invoices i.e. no labour charged
2. Payments made to labour hire firms
3. Any invoices not paid by 30th June (this new system is not affected by accounting basis i.e. accrual or cash accounting)
4. Employee PAYG or any agreed withholdings

When does the new system begin and when does the first report need to be lodged?

The new system begins today i.e. 1st July 2012. The forms need to be lodged annually on the 21st of July. Therefore, the first form will need to lodged by 21st July 2013.

How do I lodge the form?

Either a business owner or his/her tax agent can lodge the form. It can be done electronically via the ATO online portals or by completing the paper version of the form and sending it to the ATO. Interestingly, BAS Agents are not permitted to lodge these forms as this is not seen as a BAS Service – go figure!

What information needs to be recorded each year to assist with the reporting process?

Ideally, if you are using an accounting software package or program, you will be able to record the information you require for lodgement within the software. Firstly, you need to record the contractors’ personal details – most programs allow you to do this in the “contacts” area. Ensure you record their ABN within the contact’s card/record. Then, you need to record all payments you make to contractors. You probably already do this as part of your bookkeeping. To make things easy, create one main account called “Contractor Payments” then create sub-accounts, one for each contractor. Record payments for each contractor to his/her particular account as you go through-out the year. Then on July 1st 2013, you will be able to run a report from your program for each contractor which will provide the total gross amounts you have paid to him/her – easy! Don’t leave this until June 30 2013 as it will be a headache! Organise this now. If you need help, ask your bookkeeper or tax agent to assist you.

During the webinar, the presenter told us about a worksheet which has been created to help record payments to contractors. This may be of use if you are not using software or would like to keep a running record of payments made outside of your software. The worksheet can be downloaded by going to the ATO website and searching for quick code: 00313486 via the “businesses” tab.

I need more information. Where can I get it?

More information can be found on the ATO website at Taxable Payments Reporting. A sample copy of the form for lodgement can be found there also. The ATO also have a fact sheet for you to read here.

NEW! Here is a video explaining how to lodge your Taxable payments annual report online: