• Frequently asked questions and answers

    1. Why is there a taxable payments reporting system?

    The reporting system helps to address longstanding tax compliance issues by contractors in the building and construction industry including:

    • non-lodgment of tax returns
    • income being omitted from tax returns that are lodged
    • non-compliance with GST obligations
    • failure to quote an ABN
    • use of an invalid ABN.

    2. Why are businesses required to report annually rather than quarterly?

    We've varied the reporting requirements from quarterly to annual reporting to minimise compliance costs for businesses.

    3. Why am I required to report on a cash basis?

    This resulted from feedback provided in the consultation process. Many businesses in the building and construction industry are micro businesses, and a significant proportion of these businesses account on a cash basis. We've varied the reporting requirements to only require businesses to report the payments they make to contractors in the financial year in which the payments are actually made (cash basis).

    4. What does the ATO do with the information reported?

    The information that is reported is used for

    • pre-filling purposes to make it easier for individual contractors to lodge their income tax returns,
    • data-matching purposes to ensure contractors comply with their tax obligations including lodging their tax returns, reporting all their income in lodged tax returns, complying with their GST obligations, and quoting their correct ABN. Find out about our current data matching activities

    5. Do I also need to report payments I make to suppliers?

    Suppliers who provide building and construction services are also contractors for the purpose of the taxable payments reporting system. You need to report the total payments you make to suppliers for building and construction services.

    6. Do I report payments to contractors who repair and service my tools and equipment?

    No. Maintenance of equipment and tools is not a building and construction service.

    7. I only purchase properties for rental purposes, and engage a property manager to manage them. Do I need to report the payments I make to the property manager?

    No. You are not required to report because you're not considered to be carrying on a business that is primarily in the building and construction industry.

    8. A property manager pays a plumber to fix a burst water pipe or undertakes maintenance work on a property. Do the payments the property manager makes to the plumber have to be reported?

    Because the property manager’s business activity is managing investments, they aren't considered to be a business that is primarily in the building and construction industry. As a result, the property manager doesn't need to report the payments made to the plumber.

    However, if the property manager creates a separate entity to manage the building maintenance of the property, this entity will need to report the payments to the plumber – this is because the separate entity is considered to be primarily in the building and construction industry.

    9. I'm a land owner and I engage a project manager to manage the development of a building on my land. Do I need to report the payments I make to the project manager?

    No. Your core business activity is to purchase and sell property. You're not carrying on a business primarily in the building and construction industry and are not required to report payments made to the project manager.

    10. I'm a land owner and have a project manager that engages contractors to do excavation and foundation works on my land – do I report the payment made to these contractors?

    The project manager is required to report the payments made to contractors for building and construction services, because it would be considered to be carrying on a business that is primarily in the building and construction industry. Project management is a building and construction service.

    11. If I engage a contractor, and reimburse expenses they incurred in the course of providing building and construction services, do I need to include the reimbursed amounts in my annual report?

    Yes. If you are a business primarily in the building and construction industry, the reimbursed amount is required to be included in your annual report.

    12. When is a payment for labour considered to be incidental?

    If the labour component is immaterial to the actual supply of the material, then it is incidental.

    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.

    13. I'm in the building and construction industry. Sometimes I pay one of my contractors for invoices for both materials and labour. Other times, I pay for materials only. Do I report all of the payments I make to this contractor?

    You're not required to report payments made for materials only.

    However, if you're unable to easily separate payments made for materials only without significant administrative effort, you can report all the payments you make to this contractor.

    14. Are government or non-profit organisations required to report payments they make to contractors for building and construction services?

    Yes. If a government or non-profit organisation is carrying on a business that is primarily in the building and construction industry and they pay contractors for building and construction services, they're required to report the total payments they make to each contractor for building and construction services.

    15. I'm a member of a consolidated group for income tax purposes. I'm the only member in the group conducting a business that is primarily in the building and construction industry. Do I need to report if the consolidated group is not considered to be conducting a business that is primarily in the building and construction industry?

    You're required to report payments for building and construction services you make to contractors outside of the consolidated group. The consolidated group provisions don't apply to the taxable payments reporting system. Each entity of the consolidated group is required to consider whether they are conducting a business that is primarily in the building and construction industry.

    You're not required to report payments for building and construction services made to another member within the same consolidated group.

    16. I'm a labour-hire firm. Do I need to report the payments I make to my workers who are hired under a labour-hire arrangement to provide building and construction services?

    No. You're not required to report payments if you are required to withhold amounts under the pay as you go (PAYG) withholding provisions for labour-hire or on-hire arrangements.

    See also:

    17. I'm in the building and construction industry. Am I required to report payments I make to contractors who are foreign residents?

    Payments to foreign residents for building and construction services performed in Australia are generally subject to pay as you go (PAYG) foreign resident withholding. If the payments are not subject to PAYG withholding then they are required to be reported in the Taxable payments annual report.

    Payments to foreign residents for work performed overseas are not reported in a Taxable payments annual report.

    See also:

    18. Do I have to provide my contractors with the details of the amounts I report in relation to payments made to them?

    No. There is no requirement to provide your contractors with any details of the information reported, but you can choose to provide your contractors with details of the information you provided using the Payee information statement.

      Last modified: 23 Jun 2016QC 27311