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Taxable Payments Reporting for the Construction Industry

By Andrew Storrier

2 min read

The ATO is cracking down on non-compliance across a range of industries and the construction industry is just one of many that has come into its line of sight. So who needs to report and what do you need to lodge in order to avoid stiff penalties and audits?

Who Needs to Report

The ATO’s taxable payments reporting system targets businesses that undercut competitors by not paying the correct amount of tax to contractors.

Since July 2012, all businesses in the construction and building industries that make payments to contractors must report. Companies are considered part of the construction and building industry if 50% of the business’s income and/or activities derive from providing building and construction services, including architectural work, certification, decoration, engineering, landscaping, project management and surveying. The report is due every year on 28 August.

In the past, reporters said the system was overly cumbersome, making timely submission difficult. However, the ATO has simplified online lodgement where companies only need an AUSkey and business software that can generate an annual report.

Contractors receiving payments from construction companies also need to be aware that the ATO will be cross-referencing their tax lodgements with those of the payer. The ATO advises contractors to get their house in order to avoid audits or stiff penalties.

Tips for Reporting

The ATO comes across a lot errors in reporting, which slows down the entire process and takes you away from doing what you do best – getting the job done.

The two most common reporting issues are:

  1. Incorrect ABN on the report: Always double-check the contractor’s ABN as their circumstances might have changed. The ATO also sees a lot of contractors using the wrong ABN to avoid paying tax. As a business owner, you should be vigilant about any behaviour that could affect your company.
  2. GST paid when the contractor isn’t registered for GST: You can’t claim back the GST despite paying the contractor the extra 10% on their invoice.

ABN Lookup is a great way to counter these issues, allowing you to double-check the business details of the contractors you engage.

If you haven’t already, it’s time to set yourself up with some accounting software, such as QuickBooks Online, and start recording your contractor payments. This kind of software will automatically prepare reports for you in a few simple steps, taking all the headache out of lodging.

With the ATO trying to level the playing field in the building and construction industry, it’s time to get on top of your reporting requirements. While most modern accounting software assists with compliance issues, the ATO has taken several steps to make lodging hassle free.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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