Prepare now for your taxable payments annual report (TPAR) lodgement. Whether you lodge your own report directly with the ATO or if you use our lodgement services, this form is due by 28 August 2023.
What is a TPAR and why is it important?
A TPAR is an annual report that must be lodged with the Australian Taxation Office (ATO) by businesses that pay contractors and suppliers in certain industries. TPAR stands for Taxable Payments Annual Report.
The TPAR is a tool used by the ATO to ensure that businesses and contractors are complying with their tax obligations, particularly in industries where cash payments and the non-reporting of income are more common.
TPAR aids the ATO in ensuring tax compliance for contractors, by focusing on:
Income Reporting: When businesses fill out the TPAR, you are required to include details about payments made to contractors. This information helps the ATO track income that contractors receive, ensuring that contractors are accurately reporting all of their income on their tax returns.
GST Compliance: The TPAR also helps the ATO monitor whether contractors are meeting their Goods and Services Tax (GST) obligations. For instance, if a contractor is registered for GST, they should be charging this on their invoices. If the gross payment reported in the TPAR does not align with the GST reported by the contractor, the ATO can follow this up.
Data Matching: The ATO uses the data provided in TPARs to cross-check information reported by contractors in their tax returns. If there are discrepancies between the two, the ATO can investigate further. This data matching process helps ensure that contractors are not under-reporting their income.
Industry Transparency: TPAR requirements are particularly focused on industries that tend to have a higher incidence of cash jobs or under-reported income. By making income and payments more transparent in these sectors, the TPAR system makes it harder for businesses and contractors to avoid their tax obligations.
Do I need to lodge a TPAR?
While all businesses need to be aware of TPAR, certain industries are specifically required to lodge a TPAR. These industries include:
Building and construction
Road freight services
Information technology (IT) services
Security, investigation or surveillance services
What types of payments need to be reported?
Only report payments you make to contractors for the above services. Contractors can be sole traders, companies, partnerships or trusts. Some suppliers may be excluded based on the nature of their services. Payments you do not need to report
You do not need to report the following payments in your TPAR:
payments for materials only
unpaid invoices after 30 June: only report payments you made on or before 30 June each year
workers engaged under a labour hire or on-hire arrangement. This includes a labour hire firm that hires workers under a labour-hire arrangement to provide services
pay as you go (PAYG) withholding payments. For example, you do not report payments to employees
payments to foreign residents for work performed in Australia
foreign residents for work performed overseas.
What happens if you don't lodge your TPAR?
The ATO can impose penalties on businesses that fail to submit the TPAR by the due date, or provide a report that is false or misleading. Here are some potential consequences for failing to comply with TPAR requirements:
Failure to Lodge (FTL) on Time Penalty: If a business doesn’t lodge the TPAR by the due date, the ATO may apply a failure to lodge on time penalty. The size of the penalty is determined by the size of the business and how long the report is overdue. For small businesses, the penalty might be $313 each 28 day period the TPAR is late, up to a maximum $1,565 if 5 months late. For larger businesses, the minimum penalty starts at $1,565 for each 28 day period the TPAR is late up to a maximum of $7,825.
False or Misleading Statement Penalty: If a business provides a TPAR that is false or misleading, the ATO can impose a penalty. The size of this penalty can vary depending on whether the error was due to reasonable care not being taken, recklessness, or intentional disregard of the tax law.
General Interest Charge (GIC): If a penalty amount is not paid by the due date, the ATO can apply a general interest charge to the unpaid amount.
Things to review before finalising your TPAR:
To ensure the accuracy of your TPAR, ensure you adopt the following practices in your business:
Maintain Good Records: Good record-keeping is the foundation of accurate TPAR reporting. Keep track of all payments made to contractors, including the contractor's name, ABN, address, and the total amount paid (including any GST). Check that you have current details for relevant suppliers: ABN, business name and business address. Also make sure you have tax invoices for all supplier business-related transaction. It's important to keep these records for at least five years.
Use Reliable Accounting Software: Accounting software can help manage and organise your financial data, including payments made to contractors. Many software programs can generate reports that can be used to complete the TPAR, which can greatly simplify the process and reduce the chance of error. Xero is our pick there.
Verify Contractor ABNs: Always verify the ABN of any new contractors you engage with, and check that it matches the business name. The online ABN lookup tool provided by the ATO can be used for this purpose.
Check GST Registration: If a contractor is registered for GST, they should be including GST in their invoices. Check that the amount you're paying matches the amount on the invoice, including GST.
Regular Review: Regularly review your business’s financial transactions and ensure that all the contractor payment details are correctly entered and updated in your records. This can help prevent errors from accumulating and becoming harder to correct later on.
Seek Professional Help: If you're unsure about any aspect of your TPAR lodgement, don't hesitate to seek advice from one of our experienced Accountants at HelloLedger. We can also prepare your TPAR and ensure that it is accurate and fully compliant with ATO requirements.
Most accounting software programs allow for the easy setup and maintenance of TPAR relevant supplier groups, making the annual report preparation quick and easy. Talk to us about setting up taxable payments reporting in Xero, our recommended software for all your business needs.