Important information for contractors in the building and construction industry

From 1 July 2012, if you are a contractor in the building and construction industry, businesses in this industry will have to report to the ATO the total amount they have paid you each year for building and construction services.

Taxable Payments Reporting was introduced under the 2011-2012 budget, with the aim of improving compliance with tax obligations by those contractors who are currently not doing the right thing.

The information reported about payments made to contractors will be used for our data matching to detect contractors who have:

• failed to lodge tax returns
• not included all their income on tax returns that have been lodged.
• not complied with GST obligations
• failed to quote an Australian business number (ABN)
• used an invalid ABN

The ATO will then compare this information with the income included in tax returns.

John Leonard, Assistant Commissioner, Australian Taxation Office, said these new reporting requirements have been introduced to create a level playing field for businesses and improve tax fairness within the industry. “Contractors who fail to meet their tax obligations can gain an unfair competitive advantage,” Leonard said.

“We will use the information reported to detect contractors who have not lodged tax returns or failed to include all their income in tax returns lodged.”

“We are asking contractors in this industry to make sure they include all their income in their tax return to avoid any penalties.”

The information to be reported each year by the business that paid you will be:

• your Australian business number (ABN)
• your name
• your address
• total amount paid to you including any GST.

Make sure you:

• lodge your 2012-13 tax return by the due date and include all your income
• lodge any prior years’ tax returns as soon as possible
• consider making a voluntary disclosure if you think you have made a mistake in a previously lodged tax return. Where you voluntarily advise the ATO of any errors or omissions, any penalties that apply may be reduced.

If your tax obligations are not up to date or you choose to do nothing, you could be subject to a review or audit and may face penalties.

You should also be aware that you have reporting requirements if you  pay contractors for building and construction services.

You'll only need to report this once a year and there are a number of items you don't need to report, such as invoices that remain upaid at 30 June. For further information, you should speak with your accountant, or go to http://ato.gov.au/taxablepaymentsreporting. A 45-minute webinar will guide you through the process, or you can refer to the FAQ section, as well as pages of examples.