Shining light on off-the-books payments

Dodgy contractors trying to keep income ‘off-the-books’ and businesses helping them do so are being put on notice as the Australian Taxation Office (ATO) continues to shine a light on shadow economy behaviour.

Paying cash in hand to avoid paying tax is a significant part of the shadow economy. However, the taxable payment reporting system (TPRS) allows the ATO to investigate this conduct.

Around $350 billion in payments made to 950,000 contractors were reported to the ATO in the last financial year. The ATO expects more than 270,000 businesses to complete a taxable payment annual report (TPAR) for the current 2021-22 year.

TPRS obligations apply to businesses in the building and construction industry, as well as businesses that provide cleaning, courier, road freight, information technology and security, investigation, or surveillance services and have paid sub-contractors in relation to these services. The ATO is reminding these businesses that they will have to lodge a TPAR with the ATO by 28 August setting out payments to their contractors.

ATO Assistant Commissioner Peter Holt said “The TPAR is just one tool in the ATO’s toolbelt, helping crack down on $11 billion a year in missing taxes and keeping things fair for those businesses and contractors doing the right thing.”

“The ATO has sophisticated data and analytics to identify businesses that fail to lodge a TPAR. Not reporting payments to contractors may be seen as a red flag and will prompt closer scrutiny from the ATO on your own affairs as well as those of your contractors. Trying to “help out” your contractors by not disclosing their payments is a great way of bringing attention on yourself.”

The TPAR was introduced in 2012 to level the playing field and ensure businesses in the building and construction industry reported their income and paid their fair share of tax.

The ATO uses information reported on the TPAR to make sure that businesses are complying with their tax obligations, for example, reporting the correct amount of income, lodging business activity statements (BAS) and income tax returns, paying the right amount of tax, being registered for GST if required, and using a valid Australian business number (ABN).

“We know most small businesses do the right thing, however there are some contractors out there who deliberately don’t report or under-report their income, making it unfair for honest businesses.”

“Businesses and tax professionals can view the data the ATO receives about their business, like taxable payments reported under the TPRS, as a reported transaction in ATO Online platforms” said Mr Holt.

“Our new reported transactions services can help businesses and their tax professionals to view their data to make it easier to meet tax obligations.”

Mr Holt also reminds sole traders any payments reported to the ATO through TPRS will be pre-filled in their tax return at tax time.

“If you’re a sole trader, any payments you received as a contractor that were reported in a TPAR will be available as a pre-fill information report into your tax return. Whether you lodge your tax return yourself or through an agent, just remember to double check the pre-fill information is complete and correct before lodging, especially as not all your income may have been reported to us previously.”

The ATO reminds businesses and tax professionals who are lodging on behalf of their clients to contact the ATO if they need additional time to lodge their TPAR.

/Media Release. This material from the originating organization/author(s) may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.