Ever taken up a tradie’s offer to get a discount by paying cash? You’ve got to admit it’s tempting, especially when the bills are piling in from every direction. Maybe the guy supplying your stone cladding says he’ll knock $3000 off his asking price for cash on delivery. Or the electrician has suggested he’ll do your appliance installations off the books.
Cash is still legal tender and you’re not breaking the law by paying for goods and services with a wad of notes.
But here’s the problem: making payments in cash makes it easier for businesses to under-report their income, especially if they don’t supply a receipt for their goods and/or services. In other words, it can encourage tax avoidance.
It will come as no surprise that the government isn’t a fan of any activity that diminishes its coffers. Some estimates say the cash economy costs the government $15 billion in lost federal tax revenue.
So why am I telling you all this? Because the government has the construction industry in its sights.
In 2012, the Taxable Payments Annual Report (TPAR) was introduced and if you’ve jumped on the development bandwagon, there’s a good chance you’ll need to complete a TPAR.
Read on for my quick-start guide in (almost) everything you’ll need to know...
The intention of the TPAR is to make sure contractors working for businesses in the construction sector report all their income to keep things fair for everyone. It’s due by August 28 every year.
What the government is trying to crack down on is the black market economy with people taking cash payments under the table. They do it by using the TPAR for data matching – they say this contractor got money from Rob and Rob said that he paid money to the contractor, both of them said the same amount, therefore it must be okay. But if the two of them are reporting something different then that’s going to set an alarm bell off.
Doing these reports can actually get quite onerous, but if you’re supposed to lodge a TPAR and you don’t bother, you’re going to increase your chances of getting audited. In fact I’ve heard that up to 50% of audits have come up because of a lack of a TPAR or something that’s included in a TPAR that doesn’t match up.
And even if you’ve done nothing wrong, an audit is a big headache. A full audit by the ATO can take up a huge amount of time and resources.
So, what you’ll find below is an FAQ to give you an overview of the key things you need to know about the TPAR.
I’ve just started out in property development. How do I know if I need to lodge a TPAR?
The ATO says you are considered to be a business that primarily operates in building and construction services if any of the following applies:
· in the current financial year, 50% or more of your business income is earned from providing building and construction services
· in the current financial year, 50% or more of your business activity relates to building and construction services
· in the financial year immediately before the current financial year, 50% or more of your business income was earned from providing building and construction services.
Which payments do I need to include in the report?
· Payments to contractors
· Payments to subcontractors
Which payments are not included in the report?
· Payments to employees
· Payment for materials only
· Payments within consolidated groups
· PAYG withholding payments
· Contractors who don’t provide an ABN
· Payments for private and domestic projects
· Incidental labour
· Invoices that are unpaid as of 30 June
What details will I need to provide?
Keep very detailed records of all invoices from contractors and subcontractors to make completing the report simple.
· The name, address and ABN of each contractor
· The total amount you paid them for the year
· The amount of GST included in the total amount paid
How do I lodge a TPAR?
You can lodge your TPAR online using the lodgement option that works best for your business:
· Your business software may be able to create and lodge your TPAR. Some programs that have this capacity include Xero, MYOB and QuickBooks
· You can complete and lodge through the online services for business
· Individuals and sole traders can lodge through ATO services accessed via myGOV
· Your tax professional can lodge on your behalf
You can also order and fill in a paper form and mail it to the ATO.
What happens if my TPAR is late?
You’ll be fined if your report is late. The amount depends on the size of your business and how far overdue your TPAR is, but typically ranges from $222 to $5550.
Most of us hate paperwork but I can assure you that being audited is no picnic so you simply need to accept the TPAR as part and parcel of being a property developer.
I would highly recommend you use an online accounting platform of some description that allows you to keep records and generate these kinds of reports.
And that covers (most) of what you’ll need to know about TPAR!
Cash is still legal tender and you’re not breaking the law by paying for goods and services with a wad of notes.
But here’s the problem: making payments in cash makes it easier for businesses to under-report their income, especially if they don’t supply a receipt for their goods and/or services. In other words, it can encourage tax avoidance.
It will come as no surprise that the government isn’t a fan of any activity that diminishes its coffers. Some estimates say the cash economy costs the government $15 billion in lost federal tax revenue.
So why am I telling you all this? Because the government has the construction industry in its sights.
In 2012, the Taxable Payments Annual Report (TPAR) was introduced and if you’ve jumped on the development bandwagon, there’s a good chance you’ll need to complete a TPAR.
Read on for my quick-start guide in (almost) everything you’ll need to know...
The intention of the TPAR is to make sure contractors working for businesses in the construction sector report all their income to keep things fair for everyone. It’s due by August 28 every year.
What the government is trying to crack down on is the black market economy with people taking cash payments under the table. They do it by using the TPAR for data matching – they say this contractor got money from Rob and Rob said that he paid money to the contractor, both of them said the same amount, therefore it must be okay. But if the two of them are reporting something different then that’s going to set an alarm bell off.
Doing these reports can actually get quite onerous, but if you’re supposed to lodge a TPAR and you don’t bother, you’re going to increase your chances of getting audited. In fact I’ve heard that up to 50% of audits have come up because of a lack of a TPAR or something that’s included in a TPAR that doesn’t match up.And even if you’ve done nothing wrong, an audit is a big headache. A full audit by the ATO can take up a huge amount of time and resources.
So, what you’ll find below is an FAQ to give you an overview of the key things you need to know about the TPAR.
I’ve just started out in property development. How do I know if I need to lodge a TPAR?
The ATO says you are considered to be a business that primarily operates in building and construction services if any of the following applies:
· in the current financial year, 50% or more of your business income is earned from providing building and construction services
· in the current financial year, 50% or more of your business activity relates to building and construction services
· in the financial year immediately before the current financial year, 50% or more of your business income was earned from providing building and construction services.
Which payments do I need to include in the report?
· Payments to contractors
· Payments to subcontractors
Which payments are not included in the report?
· Payments to employees
· Payment for materials only
· Payments within consolidated groups
· PAYG withholding payments
· Contractors who don’t provide an ABN
· Payments for private and domestic projects
· Incidental labour
· Invoices that are unpaid as of 30 June
What details will I need to provide?
Keep very detailed records of all invoices from contractors and subcontractors to make completing the report simple.
· The name, address and ABN of each contractor
· The total amount you paid them for the year
· The amount of GST included in the total amount paid
How do I lodge a TPAR?
You can lodge your TPAR online using the lodgement option that works best for your business:
· Your business software may be able to create and lodge your TPAR. Some programs that have this capacity include Xero, MYOB and QuickBooks
· You can complete and lodge through the online services for business
· Individuals and sole traders can lodge through ATO services accessed via myGOV
· Your tax professional can lodge on your behalf
You can also order and fill in a paper form and mail it to the ATO.
What happens if my TPAR is late?
You’ll be fined if your report is late. The amount depends on the size of your business and how far overdue your TPAR is, but typically ranges from $222 to $5550.
Most of us hate paperwork but I can assure you that being audited is no picnic so you simply need to accept the TPAR as part and parcel of being a property developer.
I would highly recommend you use an online accounting platform of some description that allows you to keep records and generate these kinds of reports.
And that covers (most) of what you’ll need to know about TPAR!
