What is a taxable payments annual report (TPAR)?
Some businesses and government agencies who make payments to contractors may need to report these payments by lodging a taxable payments annual report (TPAR) with the ATO. Some government entities must file a TPAR to report grants they award to people or organisations.
What is the purpose of a TPAR?
The Australian Taxation Office developed TPAR reporting to prevent contractors from either not reporting or under-reporting their income.
Which businesses must lodge a TPAR?
If you operate a business that has an Australian Business Number, and you employ contractors to fulfil services essential to your business, you may be required to lodge a TPAR.
Business sectors that may need to file a TPAR for payments to contractors include:
- building and construction
- cleaning
- road freight
- couriers
- information technology
- security, investigation or surveillance.
Most businesses that hire contractors need to lodge a TPAR if they earn at least 10% of their total income from their services. The exception to that rule is building and construction businesses, which need to lodge a TPAR only if they earn 50% or more of their income from the services of contractors.
Here are a few examples that illustrate how TPAR rules apply:
Example 1: Your construction company secures a contract for building a new shopping centre. You employ contractors to perform the work and therefore must report those contractor payments on your TPAR.
You also hire an independent accountant to manage your books. Because the accountant is providing a professional service that’s not part of the building and construction sector, you don’t need to report the accountant’s fee on your TPAR.
Example 2: Your company provides commercial cleaning services and uses contractors and full-time employees. While you don’t need to report employee wages on a TPAR, you do need to report all payments to contractors.
TPAR lodgement is due by 28 August each year.