Contractor payments (TPAR) are increasingly on the ATO’s radar
The deadline for submitting this report is the 28th August 2023. While it may be difficult sometimes to differentiate between an employee and a contractor the form still has to be submitted. Your accounting software can most likely help.
The ATO has drawn a line in the sand for reporting contractor payments and warns tardy businesses that missing its deadline will involve penalties and set off alarm bells about dodgy behaviour.
It is estimated that the shadow economy costs Australia $12.4 billion a year in lost taxes. It is the job of the ATO to recover this money and reports such as the Taxable Payments Annual Report (TPAR), due by 28th August, and other ATO systems are increasingly effective at clawing this money back.
It is getting harder for businesses to hide from the ATO, like using cash payments to avoid tax, as the TPAR data gives the ATO the extra puzzle pieces it needs to catch-out such dishonest behaviour.
All lost taxes have to be made up by those business and individuals who do not indulge in activities such as paying cash, payments that temp some to pay less tax than they should. It may seem like a win to some, but it is a penalty for every honest business and individual.
The ATO says, "If you are asking for cash and not declaring it to the ATO, you will receive a ‘please explain’ and you will be penalised. It’s not a matter of ‘if’, it’s a matter of ‘when’.”
The TPAR system recorded $400 billion in payments made to almost 1.1 million contractors in 2022–23.
The typical businesses paying contractors included those in building and construction, cleaning, courier and road freight, information technology and security, and investigation or surveillance services.
The Tax Office had recently issued more than 16,000 penalties to businesses which failed to lodge previous TPARs with the average penalty about $1,110.
The ATO also said that failure to meet the deadline could be seen as a “red flag and prompt closer scrutiny”.
The TPAR is just one weapon in the ATO’s arsenal helping expose missing income and keeping things fair for businesses doing the right thing.
Steps to work out if you need to lodge
Step 1: calculate your total payments received from contractors for each relevant service.
Add up all payments your business received for each relevant TPRS service during the financial year. Include payments received when employees, contractors or sub-contractors performed services on your behalf.
Step 2: calculate your current or projected business income
If you have been operating your business for:
- the full financial year: use your current business income for the year
- less than 12 months of the financial year: use your projected business income. Do this by working out what your business income will be for the next full financial year.
Step 3: calculate what per cent of your business income is from a relevant service
Calculate this percentage by using the following formula for each financial year:
Total payments received for a relevant service ÷ current or projected business income x 100 = %
You must lodge a TPAR if:
- 10% or more of your business income for the financial year is from a relevant service, and
- you made payments to contractors for a relevant service during the year.
If you need to lodge a TPAR, report the total contractor payments made to each contractor for the relevant service provided on your behalf.
ATO
Hot Issues
- 2024 Year End Tax Planning Guide (Part 1)
- Medicare levy surcharge OR basic health insurance ?
- ATO warns of ‘serious penalties’ for unlawful tax scheme promoters
- ACCC scam report
- Employees taking more sick days - and it's getting worse
- Foreign residents selling property in Australia
- How much does negative gearing really cost – an overview and an opinion?
- The Shortest-reigning Monarchs in History
- FBT Reminder – Odometer Reading
- ATO’s debts on hold campaign prompts new IGTO guidance
- A comprehensive collection of small business benchmarks
- The 2025 Financial Year tax & super changes you need to know!
- Underperforming employees: When can you terminate?
- A comprehensive list of guides to industry specific tax deductions.
- ‘Renewed concerns’ about economy sees consumer sentiment dip: Westpac
- Oldest Buildings in the World.
- Small businesses may ‘collapse under strain of payday super’, IPA warns
- ATO’s hands tied with scrapping on-hold debts, expert says
- What Drives Your Business Growth and Profits?
- Australian Taxation Office (ATO) shifting to firmer debt collection activity
- Why employee v contractor comes down to fine print
- Sharing economy reporting regime for platform operators
- Countries producing the most solar power by gigawatt hours
- Illegal access nets $637 million
- Accessing superannuation benefits.
- Does your business have a company Power of Attorney?
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- GrantConnect
- 2 in 3 SMEs benefit from instant asset write-off, survey reveals
- Updated guidance on R&D claims
- Do you know how to recover debts?
- Vimeo test
Article archive
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
- January - March 2015
- October - December 2014
July - September 2023 archive
- Contractor payments (TPAR) are increasingly on the ATO’s radar
- Superannuation and independent contractors: fresh Full Federal Court guidance
- Intergenerational Report 2023
- Property investors beware: new data matching program
- When will we learn to protect ourselves from ourselves?
- Federal Government toughens up employment laws.
- Small Business Tax Time toolkit for 2023.
- Oldest Buildings in the World
- Australian Taxation Office (ATO) target areas for tax time 2023
- Taxing unrealised capital gains a grave concern: Burgess
- Protect your business from cyber threats
- Is your content making you income?
- Australian Taxation Office (ATO) ride-sourcing data-matching program extended
- How a registered trade mark can grow your sales and your business
- The top modes of transport in the world
- Considerations When Negotiating a Resolution
- Things you can do in our digital office
- Working from home expenses for 2023
- Five questions that indicate how financially literate you are.
- New laws come into effect from July 1
- Preparing for EOFY tax scams with business and cyber resilience
- Any tax debts in arrears?
- Scammers continue to fleece unsuspecting victims
- Top 50 Greatest Cuisines
What our clients say about us