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Building and Construction Businesses to report Contractor Payments

Building and Construction Businesses to report Contractor Payments

28 May 2013

With effect from 1 July 2012, businesses in the building and construction industry have been required to annually report to the Australian Taxation Office (ATO) payments made to contractors. 

The new reporting requirements, announced as part of the 2011-12 Federal Budget, aim to improve compliance with tax obligations by contractors in the building and construction industry. 

The regulations will apply to a wide range of building and construction services including site preparation, building demolition and alterations, project management and architectural services, communications, landscape and drainage construction, electrical, plumbing, bricklaying, glazing services etc.

Who needs to report? 

The new reporting regulations will apply to businesses that utilise the services of a contractor if:

  • The business is primarily in the building and construction industry (determined as a business that derives more than 50% of its income from ‘building and construction’ services in the current year or two most recent financial years), and 
  • The business makes payments to contractors for building and construction services, and 
  • The business has an Australian Business Number (ABN).

Details of what is required to be reported

For each contractor, businesses will be required to report the following details each financial year:

  • ABN (if known) 
  • Name 
  • Address
  • Gross amount paid for the financial year (including GST) 
  • Total GST included in the amount paid

The first Taxable Payments Annual Report is due 21 July 2013 for payments made in the 2012-13 year. However businesses are encouraged to review their record keeping procedures to ensure all the necessary information is recorded to easily complete the report by the due date. 

Payments businesses need to report 

‘Building and construction services’ encompasses a wide range of activities performed on or relating to any part of a building, structure, works, surface and sub-surface. 

Where goods and service are supplied in combination, businesses contracting the services will only be exempt from the reporting requirements if the supply of services is incidental to the supply of goods. 

For example a hardware store that can arrange for the installation of certain products (such as skylights) will not be required to report payments made to contractors who do the installations as the hardware business is not primarily in the building and construction industry, it is primarily in the retail industry. 

Contractors who pay other contractors for building and construction services may also be required to report if they are carrying on a business that is primarily in the building and construction industry. 

Businesses are not required to report on payments where the invoices are for materials only, such as building supplies and materials. 

The reporting requirements will not apply to: 

  • Payments between members of the same consolidated or multiple entry consolidated group for income tax purposes;
  • Payments made to individuals or entities without an ABN; 
  • Payments made to individuals or entities whose tax is withheld under the PAYG system (ie. employees)

Examples of building and construction services and of the buildings, structures, works, surfaces and sub-surfaces that the ATO considers fit under these classifications, can be found on the ATO website athttp://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/00313486.htm&page=1&H1   

If you would like more information about how the new reporting requirements may affect your business, please contact your local Boyce Accountant.   

Source: Australian Taxation Office www.ato.gov.au/business 

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