Do you need to lodge a TPAR by 28 August?

If your business pays contractors, there is a good chance you have a report due on 28 August, and it is one of the easiest deadlines to miss. The taxable payments annual report, or TPAR, does not arrive with a reminder the way a BAS does, and plenty of business owners have never been told it applies to them.

It is also the sort of obligation that is straightforward once you know where you stand, and awkward when you find out late. Here is how to work out whether you need to lodge.

What a TPAR actually is

A TPAR is a report of the payments your business made to contractors during the financial year. It is not a tax return and there is nothing to pay with it. The ATO uses it to match what businesses report paying against what contractors report earning.

That matching is the entire point, which is why the information required is specific. It also explains why the ATO pursues late reports: an unlodged TPAR is a gap in the data rather than simply a missing form.

Payments to employees are not reported in a TPAR. This report is about contractors and subcontractors only.

The five service categories

Five areas of work come under the taxable payments reporting system:

• building and construction
• cleaning
• courier and road freight
• information technology
• security, investigation or surveillance

If your business provides any of these services and pays contractors to help deliver them, a TPAR may be due. Both halves matter. Providing the service is not enough on its own, and neither is paying contractors for something unrelated.

Working out whether it applies to you

This is where most of the confusion sits, because the test differs depending on the work you do.

If you are primarily in building and construction

You are treated as primarily in building and construction if any of the following applies:

• 50 per cent or more of your business income this financial year came from building and construction services
• 50 per cent or more of your business activity this financial year relates to building and construction services
• 50 per cent or more of your business income in the previous financial year came from building and construction services

Note that any one of the three is enough. A quiet year does not remove the obligation if the year before was a busy one.

If that describes you, and you pay contractors or subcontractors for building and construction services, and you have an ABN, you need to lodge.

If you provide the other four services

Here the test is proportional. Work out what share of your business income came from those services for the financial year:

• 10 per cent or more of your business income: you must lodge
• less than 10 per cent: you do not

Two details that catch people out. If you provide both courier and road freight services, combine the payments for both before applying the test. And the 10 per cent test does not apply to building and construction services, which use the separate 50 per cent test above.

The threshold is lower than most people expect. A business that thinks of itself as something else entirely can cross 10 per cent without noticing, which is worth checking rather than assuming.

What has changed this year

Paper lodgment is gone. The ATO no longer accepts paper TPAR lodgments. Every report must now go through an electronic channel:

• Online services for business
• Online services for individuals and sole traders
• SBR-enabled accounting software
• a registered tax agent

If lodging on paper is what you have always done, that is the change to plan around. Leaving it to the last week is a poor time to discover you need access to a system you have never used.

What you need for each contractor

For every contractor you paid, the report needs their details and the totals for the year:

• their ABN, and each ABN separately if it changed during the year
• their name, business or individual
• their address
• the gross amount paid for the year, including GST and any tax withheld
• the total GST you paid them
• any tax withheld where an ABN was not quoted

Most accounting software will assemble this if contractor records have been kept properly through the year. Where it becomes painful is when contractors were paid without their ABN recorded, because that information then has to be chased after the fact, in August.

If you do not need to lodge, say so

This is the step most people skip. If you have lodged a TPAR before but do not need to this year, submit a non-lodgment advice form.

Without it, the ATO’s records show a business that lodged last year and has gone silent, which reads as an oversight rather than a deliberate change. That triggers reminder letters, and penalties tend to follow reminder letters. A short form now prevents a slow problem later.

If you lodge late

A failure to lodge on time penalty can apply. For a small business it is one penalty unit for each period of 28 days the report is overdue, up to a maximum of five penalty units.

The dollar value of a penalty unit is set by law and indexed periodically, so check the current amount rather than relying on a figure you remember. The structure is the useful part: the penalty escalates with each 28 day block, so a report that is a fortnight late and one that is six months late are very different problems.

What to do before 28 August

If you pay contractors at all, work through this now rather than in the last week of the month.

1. Check the five categories. Does your business provide any of that work?
2. Apply the right test. The 50 per cent test for building and construction, the 10 per cent test for the rest, with courier and road freight income combined.
3. Check your contractor records. Every contractor needs an ABN, an address and a full year of payment totals. Chase anything missing now.
4. Confirm how you will lodge. Paper is no longer an option, so make sure you have working access to an electronic channel.
5. If you do not need to lodge, submit a non-lodgment advice so the silence is on the record.

If you are unsure whether the thresholds apply to your business, that is worth a short conversation before the deadline rather than a penalty conversation after it. We can work through the tests with your actual figures and, if a TPAR is required, lodge it for you.

This article is general information only and does not take your particular circumstances into account. The thresholds and requirements described here depend on the specifics of your business, so please get advice about your own situation before acting.

General information only This article is general information, not personal advice. It does not take your particular circumstances into account. Before you act on anything here, talk to us so we can give you advice that fits your situation.