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  • Taxable payments reporting system – effectiveness

    Under the taxable payments reporting system (TPRS), some businesses need to report information to us about the payments they make to contractors for services.

    This information must be reported to us each year on the Taxable payments annual report (TPAR).

    TPRS was first introduced into the building and construction industry from 1 July 2012. It has now been extended to certain other industries (see Taxable payments annual report).

    The information we collect through taxable payments reporting aims to address:

    • non-lodgment of tax returns
    • omitted income in tax returns
    • non-compliance with goods and services tax (GST) obligations.

    Our focus areas in administering the TPRS are:

    • educating businesses about their reporting obligations
    • engaging contractors to help them meet their tax obligations.

    We also assist sole traders to lodge accurate annual income tax returns by pre-filling their income information each tax time by using the TPRS data we collect.

    Find out about:

    Our first report in 2015

    In May 2015, we released the report Taxable payments reporting – Effectiveness measurement 2015. This provided our initial observations about the impact of taxable payments reporting on voluntary compliance in 2012–13.

    The 2015 report provided a snapshot of the total growth in liabilities reported from the building and construction industry, before and after the implementation of TPRS.

    Additional income tax and GST liabilities of $2.3 billion for 2012–13 were voluntarily reported by businesses whose incomes were reported under the TPRS. This amount comprised:

    • $265 million in income tax
    • $506 million in GST
    • $1,128 million in pay as you go (PAYG) withholding
    • $357 million in PAYG instalments.

    These increases were not attributed solely to the impact of the TPRS.

    Our latest results

    Since our first report was released, we have analysed the fuller set of data available to us from TPRS reporting in the building and construction industry over four years.

    We have refined our methodologies and are now better able to estimate the revenue directly attributable to the introduction of the TPRS.

    Our new measures for the TPRS are:

    • Direct revenue – an estimate of the liabilities raised as a result of the TPRS through
      • voluntary lodgment of income tax returns and activity statements
      • enforcement action on non-lodgment of income tax returns and BAS
      • engagement activities on omitted income and GST compliance
       
    • Wider revenue effects – an estimate of the additional tax paid by taxpayers, only where there is a clear causal connection between our activity and the change in taxpayer behaviour.

    The combination of these measures is known as the total revenue effects – an estimate of the additional tax revenues that result from voluntary compliance and our client engagement activities.

    The table below shows direct revenue, wider revenue effects and the resulting total revenue effects, from 2012–13 to 2015–16 (the latest year for which we have data).

    Revenue effects from the TPRS

    Revenue measure

    2012–13
    ($m)

    2013–14
    ($m)

    2014–15
    ($m)

    2015–16
    ($m)

    Direct revenue

    371.8

    638.0

    1,160.6

    1,760.4

    Wider revenue effects

    317.2

    559.9

    941.5

    956.4

    Total revenue effects

    689.0

    1,197.9

    2,102.1

    2,716.8

    We use statistical models to estimate the wider revenue effects of the TPRS. The wider revenue effect observed in the building and construction industry was compared to growth in GST and PAYG withholding in similar industries over the same period.

    Growth in tax receipts for the building and construction industry had a consistent upward trend, which was not evident in similar industries where the TPRS did not apply.

      Last modified: 12 Feb 2019QC 57858