As part of the 2011-12 Federal Budget, the government announced the introduction of taxable payment reporting for businesses in the building and construction industry. The introduction of this reporting measure was aimed at improving compliance by contractors, particularly those not lodging all of their income on their income tax returns. With the due date for lodgement of the 2015 Taxable Payment Report rapidly approaching (being 28 August), it is important to understand whether your business is firstly required to prepare such a report, and if so, the components necessary to complete this report. Who Needs To Report?The Taxable Payment Report is required to be completed by businesses:
- Primarily in the building and construction industry;
- Making payments to contractors for building and construction services; and
- That has an Australian Business Number (ABN).
You are considered to be a business that is primarily in the building and construction industry if any of the following apply:
- in the current financial year, 50% or more of your business activity relates to building and construction services;
- in the current financial year, 50% or more of your business income is derived from providing building and construction services;
- in the financial year immediately before the current financial year, 50% or more of your business income was derived from providing building and construction services.
What Needs To Be Reported? Whilst a number of accounting software packages can now automatically produce the information necessary to complete this report, the information entered into these software packages is particularly important to ensure that the correct data is represented in the Taxable Payments Report. The report requires the following information to be disclosed for each contractor:
- Gross amount you paid for the financial year (this is the total paid including GST)
- otal GST included in the gross amount you paid.
It is however important to be aware that not all payments to contractors need to be disclosed on this report. Where a supplier’s invoice includes both a labour and material component, and the labour component is only incidental to the supply, the payment needs to be excluded from the Taxable Payment Report. In addition, where a supplier’s invoice has been received but not paid for by 30 June of the relevant financial year, it too should not be disclosed on the Taxable Payment Report. A number of other technical matters are relevant in completing the Taxable Payment Report, so it is recommended that where you are unsure of your reporting obligations, that you contact your LBW Chartered Accountants representative for further assistance.