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  • Building and construction businesses

    If you're running a business primarily in the building and construction industry, you will need to lodge a Taxable payments annual report if you:

    • make payments to contractors for building and construction services, and
    • have an Australian business number (ABN).

    You need to report these payments to us on the Taxable payments annual report by 28 August each year.

    Activities and services considered to be building and construction are broad.

    Some examples include architectural work (including drafting and design), certification, decorating (including painting), engineering, landscaping and construction, project management and surveying. Check our list of examples of building and construction services to see whether your business activities and the services you pay for are included.

    Our webinar Taxable payments reporting for building and constructionExternal Link (29 mins 11 secs) outlines the requirements for building and construction businesses.

    On this page:

    When is a business 'primarily in the building and construction industry'?

    You are considered to be a business that is primarily in the building and construction industry if any of the following apply:

    • in the current financial year, 50% or more of your business income is earned from providing building and construction services
    • in the current financial year, 50% or more of your business activity relates to building and construction services
    • in the financial year immediately before the current financial year, 50% or more of your business income was earned from providing building and construction services.

    Example: Business primarily in the building and construction industry

    FS Builders earns all of its income from building commercial properties for its clients. FS Builders is primarily in the building and construction industry as 50% or more of its income is from providing building and construction services.

    It is required to report the total payments it makes to contractors for providing building and construction services.

    End of example

     

    Example: All business activity in building and construction

    ABC, a property developer, has purchased a block of land in the Melbourne city precinct and intends to build apartments. ABC has created a separate entity, Upmarket Apartments Pty Ltd, to manage the project and construction of the apartments.

    Upmarket Apartments is required to report payments to contractors for providing building and construction services because 50% or more of its business activity relates to building and construction services.

    End of example

     

    Example : Not all income from building and construction

    Scott’s Cabinet Makers Pty Ltd is a business that makes and installs custom-made kitchen cabinets, which is a building and construction service activity. It also makes and sells ornamental wooden carvings.

    The proportion of income Scott's Cabinet Makers earned from its different activities was: 

    • 45% from cabinet making and 55% from carvings – for 2015–16
    • 60% from cabinet making and 40% from carvings – for 2016–17
    • 40% from cabinet making and 60% from carvings – for 2017–18.

    Scott’s Cabinet Makers is required to report the payments made to contractors in the 2017 income year because it earned 50% or more of its income from building and construction services in that year.

    Although it will not earn 50% or more of its income from building and construction services in the 2018 income year, it also needs to report payments to contractors in that year because of its 2017 income.

    End of example

     

    Example: Mining infrastructure

    Black Coal establishes a new mining facility that requires the construction of a range of infrastructure.

    Black Coal contracts Earl’s Earthworks to carry out the work. In turn, Earl’s Earthworks subcontracts the work.

    Black Coal is not required to report its payments to Earl’s Earthworks because all of its income is from coal mining. However, Earl’s Earthworks, which is carrying on a business primarily in the building and construction industry, is required to report payments it makes to subcontractors.

    End of example

     

    Example: Retail business providing minor building and construction services

    Harry’s Hardware is a business that sells building equipment to builders and home owners. For an additional fee, Harry’s Hardware can arrange the installation of certain products, such as a skylight. It does not meet either the activity or income tests of being primarily in the building and construction industry.

    The store is not required to report payments to contractors who do the installation, because it is primarily in the retail industry rather than building and construction.

    End of example

     

    Example: Separate entity for building and construction services

    Harry’s Hardware sets up a separate business entity, Harry’s Installation Services, to install the products it sells. Harry’s Hardware is not required to report on payments made to contractors, because it is not carrying on a business that is primarily in the building and construction industry.

    However, because all of the income for Harry’s Installation Services is from the provision of building and construction services (installation of products) it is required to report payments it makes to contractors for such services.

    End of example

    What are building and construction services?

    Only report payments you make to contractors for building and construction services.

    Contractors can be sole traders (individuals), companies, partnerships or trusts.

    The definition of ‘building and construction services' is broad – it includes any of the activities listed below if they are performed on, or in relation to, any part of a building, structure, works, surface or sub-surface:

    • alteration
    • assembly
    • construction
    • demolition
    • design
    • destruction
    • dismantling
    • erection
    • excavation
    • finishing
    • improvement
    • installation
    • maintenance (excluding the maintenance, service or repairs of equipment and tools)
    • management of building and construction services
    • modification
    • organisation of building and construction services
    • removal
    • repair (excluding the service or repairs of equipment and tools)
    • site preparation.

    See also:

    Example: Paying a subcontractor

    Rob's Installation Services (principal contractor) contracts Simon (first-tier subcontractor) to install products. However, as Simon is not coping with the amount of work, he subcontracts some of the work to Bill (a second-tier subcontractor).

    Rob's Installation Services needs to report on the payments it makes to Simon.

    If Simon is carrying on a business that is primarily in the building and construction industry, he is required to report the payments he makes to Bill.

    End of example

     

    Examples: Inspections and certifications

    • J & L Builders was contracted by a property developer to build a 15-storey building. J & L Builders engaged D & R Pty Ltd, to certify each stage of the building work. D & R Pty Ltd followed the project through to the end, carrying out the building inspections and issuing the occupancy permit. J & L Builders is required to report the total payments it made to D & R Pty Ltd for the inspections and certification.

    RS Electrical Pty Ltd is a business that performs work related to the design, installation and maintenance of electrical systems. The company engaged James to inspect the electrical work on a building project and provide electrical certification. The payments they made to James are reportable.

    End of example

     

    Example: Testing and tagging

    LA Plumbing Pty Ltd is a business primarily in the building and construction industry, and has engaged George to test the electrical equipment and tools they use in their business and to tag these. George's business is to test electrical appliances to ensure they are safe.

    The payments LA Plumbing Pty Ltd makes to George for testing and tagging their electrical equipment and tools are not reportable because the activity is not a building and construction service.

    End of example

     

    Example: Equipment hire with or without an operator

    An equipment hire store provides plant and machinery for hire to the building and construction industry – for example, bobcats, scaffolding and tippers (commonly known as ‘dry hire’). The store can also provide the equipment with an operator (commonly known as ‘wet hire’) for an additional fee.

    A builder who hires a bobcat with an operator (wet hire) needs to report the payment it makes to the equipment hire store because the builder is paying for a building and construction service, not just the equipment hire. Wet hire is a building and construction service.

    End of example

    Incidental labour

    A payment for labour is considered to be incidental if the labour component is immaterial to the actual supply of the material.

    If a concrete truck is used to deliver concrete, and the driver merely directs the pouring of the concrete into the trenches, the driver’s labour component is incidental, or minor, to the supply of the concrete. The builder is paying for concrete and does not need to report the amount paid.

    If, for some reason, the driver pours the concrete, levels and does the formwork, then this is more than incidental. The builder is paying for the concrete as well as a building and construction service, and the total amount paid is reported.

    Example: Incidental labour component

    Kevin purchases a stock of new taps from Harry's Hardware to install in a commercial building. Harry installs one tap by way of demonstration, so that Kevin knows how to install the rest.

    Harry's Hardware invoices Kevin for the taps and includes a small amount for the labour to demonstrate the installation. Kevin does not need to report the payment he makes to Harry's Hardware because the labour component of installing the tap is incidental to the supply of the materials.

    End of example

     

    Example: Not incidental labour component

    An electrical business provides labour and materials for various electrical applications.

    A builder pays the electrical business for the supply and installation of wiring in a commercial fit-out he is managing.

    Because the provision of the installation service is a building and construction activity and more than incidental to the supply of materials, the builder will be required to report the total payment made to the electrical business. The builder is carrying on a business that is primarily in the building and construction industry.

    End of example
    Last modified: 09 May 2018QC 51593