• Work out if you need to report

    If you're a business that is primarily in the building and construction industry, you need to report payments you make to contractors if both of the following apply:

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

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

    Activities and services that are 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.

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    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, or 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.

    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.

    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 table below shows the income Scott's Cabinet Makers earned from its different activities. 

    Financial year

    Income from cabinet making

    Income from carvings

    Year ended 30 June 2014

    45%

    55%

    Year ended 30 June 2015

    60%

    40%

    Year ended 30 June 2016

    40%

    60%

    Scott’s Cabinet Makers is required to report the payments made to contractors in the 2015 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 2016 income year, it also needs to report payments to contractors in that year because of its 2015 income.

    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.

    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.

    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
    Last modified: 30 Mar 2017QC 51594