Updated August 2023
What are Taxable Payment Reporting Systems (TPRS) and Taxable Payments Annual Reports (TPARs)?
For a long time, the distinction between an employee and a contractor was very unclear, and there were elements of being a contractor that were very beneficial for taxation purposes. An inability to track payments to an ABN was sought by individuals who wanted to minimize their tax liability.
The ATO’s response to this was to introduce the Taxable Payments Reporting System (TPRS). The TPRS, which requires certain businesses to report contractor payments, has become an important part of the Tax Administration system by allowing the ATO to:
- Identify contractors who do not meet their tax obligations so the ATO can let them know and help them correctly report their income; and
- Make sure businesses aren’t disadvantaged by competitors who don’t declare all their income.
Introducing the TPRS meant that certain Businesses who pay contractors are now required to lodge a Taxable Payments Annual Report (TPAR), which is used to identify contractors who are not meeting their tax obligations.
One of the proposed Tax Administration changes is to merge the TPRS with the Business Activity Statement lodgement program. Whilst the proposed changes will not come into effect until 1 July 2024, it is essential to ensure that your business is meeting the current obligations to avoid possible reviews or penalties.
Do I need to lodge a TPAR?
Your business may need to lodge a Taxable Payments Annual Report (TPAR) if it made payments to contractors or subcontractors during the financial year and have received at least 10% of your business income from the following services:
- Building and construction services;
- Cleaning services;
- Courier services;
- Road freight services;
- Information (IT) services;
- Security, investigation or surveillance services; or
- Mixed services (a business that provides one or more of the services listed above).
Note: Some government entities also need to report grants paid to people or organisations with an Australian business number (ABN) via the TPAR System.
What information do I need to provide in my TPAR lodgement?
The information provided in a TPAR allows the ATO to identify contractors/subcontractors who have:
- Not included all their income on their tax return
- Not lodged tax returns or activity statements
- Not registered for GST when they are required to do so
- Quoted the wrong ABN on their invoices
Therefore, records that are required to be kept and be listed in your TPAR include:
- Contractor name;
- Contractor address;
- Contractor Australian business number (ABN); and
- The amount you paid, including goods and services tax (GST).
The invoice you would have received from the contractor should have the details you need to report.
When is my TPAR due this year?
If your business is required to lodge through the TPRs, your 2023 TPAR must be lodged with the ATO by Monday, August 28th 2023.
How can we support you?
Most accounting software can be used to prepare and lodge the TPAR with the ATO. If you require any assistance lodging your TPAR, or you have any questions about your reporting requirements, please contact our office on 03 5221 6399 or email us at firstname.lastname@example.org.
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Disclaimer: This information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.
Australian Tax Office. (August 2023). TAXABLE PAYMENTS ANNUAL REPORT (TPAR). Australian Tax Office.