A change to the reporting requirements for businesses in the building and construction sector became a reality on July 1, 2012.

The new ‘Taxable Payments Report’ will require operators to report on certain payments made to contractors. The Tax Office says data from the Taxable Payments Report will improve compliance and detect contractors who have either not lodged returns or not included all of their income.

Who is affected?

The additional payments reporting burden will fall mostly upon:

– building and construction businesses – required to report on payments made to contractors they engage, and

– contractors working in the construction industry – required to report on payments made to sub-contractors they engage.

What needs to be included

The business will be required to report actual payments made to contractors, and include the following details:

– the contractor’s name*

– their ABN

– the contractor’s address

– total amount paid or credited to the contractor over the income year, and

– whether any GST has been charged.

*A contractor can be an individual, partnership, trust or company.

It will not be necessary to report payments which are subject to PAYG withholding.

The Tax Office maintains that all the details needed for the Taxable Payments Report will be contained in the invoices a construction business receives from its contractors – that is, the sort of information which businesses will already be keeping in their business records under existing tax law.

A construction business is not required to report on payments where the invoices are for goods only, such as building supplies and materials. However where there is a mixture of labour and goods, the whole amount must be included.