Get Your Taxable Payments Annual Report Sorted with On The Money Bookkeepers in Melbourne
The Taxable Payments Annual Report (TPAR) is a system of reporting to the ATO about contractors that your business pays. Only businesses in certain industries need to report, and only some payments need to be reported.
If you need to upgrade your bookkeeping and accounting systems to make managing the TPAR easy, we’d love to help. We specialise in Xero, which also offers many fully integrated add-ons to assist in running all aspects of your business well.
Why do We Need the TPAR?
The taxable payments reporting system (TPRS) started in 2012 with the building and construction industry. The ATO identified many contractors in this industry who were not reporting their income correctly on their tax returns, whether through error or deliberately.
In the first three years of the system, the ATO recovered an additional $2.3 billion of liabilities! This hefty amount was made up of under-reported GST, PAYG withholding and income tax from the building and construction industry alone.
Since 2012 the reporting system has expanded, and now more industries must submit a TPAR:
- Building and construction
- Cleaning services
- Road freight and courier services
- IT services
- Security, investigation or surveillance services
- Some government entities
- Businesses that provide mixed services that include one of the defined TPRS industries
The TPRS data matching compares the information from business activity statements to the data in the tax returns of the contractors the business has paid. The matching process highlights income discrepancies, incorrect ABNs, incorrect GST registration and BAS and tax returns that have not been submitted.
Essential Information Required on the TPAR
- Contractor business name
- Gross amount paid to the contractor
- Total GST
The TPAR is based on actual payments made within a financial year to a contractor. The payments could be for labor or materials or both. In fact, only the labor portion is required on the TPAR, but if in doubt, include all payments to contractors.
The report is due by the 28th of August each year.
The 10% Mixed Rule
If a business supplies mixed services, then if payments made to contractors for a TPRS service equal 10% or more of total GST turnover, the business must lodge a TPAR. The TPAR is required even if their primary business activity is in an industry outside the taxable payments reporting system.
For example, a florist retail shop started making deliveries to customers and charged separately for delivery services. The owners need to analyze the income from floristry sales and delivery fees and assess whether the delivery income is 10% or more of their GST turnover. If so, they will need to submit a TPAR, even though their primary business is not in the TPRS.
The same mixed supply rule applies to all the TPRS industries. If more than 10% of your business GST turnover is within one of the reporting industries, you’ll need to submit a TPAR to the ATO.
Changes Due to the COVID-19 Pandemic
During 2020 and 2021, we saw many more businesses starting to make deliveries that previously had not. Because many businesses shifted to online services, this meant a corresponding increase in deliveries. Many businesses relied on contract delivery and freight services and generated more income from delivery services – which could mean a TPAR is necessary.
Make TPAR Stress Free with Xero and On The Money Bookkeeping Services
Each year, the ATO pursues tens of thousands of contractors who need to submit a TPAR. Don’t be one of them! The ATO will penalize late lodgment of the TPAR, so get in now and prepare for the report ahead of time.
Talk to us if you’re not sure about your GST turnover or percentage of TPRS services. If you’ve got an extensive list of contractors you pay for both labor and materials, we’ll help sort out who has to be included in the report. If you’re already using Xero bookkeeping and accounting software, TPAR will be a snap.
P.S. Is your business in the building and construction industry?
Check out our case study of a construction company that went from chaos to calm after we helped them sort out payroll and other issues, including TPAR.
For more detail, go to ATO Taxable Payments Annual Report.