Summary
Under new legislation that has effect from 1 July 2018, if you are a business that provides Courier or Cleaning services you will need to report the payments you make to contractors if:
- the payments are for Courier or Cleaning services; and
- you have an Australian business number [‘ABN’].
The contractors can be individuals, companies, partnerships or trusts.
Payments to contractors must be reported to the ATO each year using a Taxable Payments Annual Report [‘TPAR’].
The first TPAR for businesses providing Courier or Cleaning services will be for the 2018/19 financial year and is due to be lodged by 28 August 2019. As a result, those businesses that are required to report will need to collect the relevant information from 1 July 2018.
What is the reason for this new reporting requirement?
The requirement to lodge a TPAR is a tax integrity measure which is designed to ensure that payments made by businesses to contractors are reported to the ATO.
Businesses in the Building and Construction industry have been required to submit TPAR’s for a number of years and the TPAR requirement is now being progressively 
rolled out to cover other industries – Couriers and Cleaners from 1 July 2018; Security providers and investigation services, Road freight transport and Computer system design (and related services) from 1 July 2019.
Requiring businesses to lodge TPAR’s enhances the ATO’s ability to use data matching to identify, and thus collect tax on, any income that is not currently being reported by contractors operating in the relevant industries.
Do you need to lodge a TPAR under the new requirements?
You will need to lodge a TPAR under the new requirements if:
- your business provides Cleaning or Courier services to its clients / customers; and
- at least 10% of your current or projected GST turnover in the relevant financial year is from payments received for supplies of Courier or Cleaning services.
What are Cleaning services?
Cleaning services include (but are not limited to) any of the following activities undertaken on a building, residence, structure, place, surface, transport / vehicle, industrial machinery or equipment and for events:
- Interior cleaning;
- Exterior cleaning (except sand blasting);
- Carpet cleaning;
- Chimney cleaning;
- Gutter cleaning;
- Road sweeping and street cleaning;
- Swimming pool cleaning;
- Park and park facilities cleaning;
‘Events’ include staging of sporting, cultural, scientific, technological, agricultural or entertainment events and exhibitions.
‘Transport / vehicles’ include trains, trams, buses, ferries, airplanes, ships, trucks, cars and other motor vehicles.
Where a cleaning activity is provided as part of a broader supply of services, you will have to determine whether the supply is:
- a composite supply of the services; or
- a mixed supply of a cleaning service and the other services.
A cleaning service will not be provided if the supply is a composite supply that includes a cleaning service.
A cleaning service will however, be provided where the supply is a mixed supply of services including a cleaning service.
Cleaning services will be part of a composite supply where they are integral, ancillary or incidental to the broader service that is being provided – for example, where contractors engaged by a business providing a gardening service clean up by removing all plant and shrub cuttings, weeds and dirt etc. This cleaning service cannot be identified separately from the gardening services the business provides to its customers.
A mixed supply of a cleaning service and another service will exist where the cleaning service:
- is a significant component of the overall service offering; or
- could realistically be made as a separate supply.
For example, a mixed supply will be made if an event management business undertakes to:
- provide and manage the IT equipment for an event;
- provide chauffeurs for high profile attendees;
- provide daily catering; and
- ensure the venue is cleaned at the end of each day.
This is because the cleaning services can be identified separately from the other services provided. Furthermore, the cleaning services are not ancillary or incidental to the other services because the cleaning services can be undertaken independently from the others.
What are Courier services?
Courier services include activities where items or goods are collected from, and/or delivered to, any place in Australia using a variety of methods including by: car; truck; station wagon; van; ute; motorcycle; motorised scooter; drones; bicycle (or other non-powered means of transport); or on foot.
Courier services are usually door-to-door services that are often used for specialty deliveries or for small parcels or packages. Goods commonly transported using courier services include parcels, packages, letters and food.
However, courier services do not include:
- passenger transport services (such as buses and taxis); and
- freight transport.
‘Freight transport’ means the transportation of bulk or large quantities of items, goods or commodities via rail, sea, air, or road (usually heavy vehicle trucks or larger vehicles) from one location to another.
As with the case of a cleaning service above, where a courier is provided as part of a broader supply of services you will have to determine whether the supply is
- a composite supply of the services; or
- a mixed supply of a courier service and the other services.
A courier service will not be provided if the supply is a composite supply that includes a courier service.
A courier service will be provided where the supply is a mixed supply of services including a courier service;
Courier services will be part of a composite supply where they are integral, ancillary or incidental to the broader service that is being provided – for example, where an online florist with no shopfront [‘Daisy Bouquet’] hires contractors to deliver the flowers that customers order.
Daisy Bouquet is not supplying a courier service when it sells flowers to customers, even if it charges customers a small fee for delivery. This is because customers can only obtain the flowers they purchase via delivery and the delivery is integral and incidental to the supply of the delivered flowers.
A mixed supply of a courier service and another service will exist where the courier service:
- is a significant component of the overall service offering; or
- could realistically be made as a separate supply.
For example, a mixed supply will arise if a restaurant offers their take away customers a choice of picking up their order from the restaurant or having it delivered to them via a courier. This is because the delivery of the food orders is a courier service that can be identified separately from the restaurant business – as a result, the restaurant is supplying courier services when it arranges for the delivery of customer orders via courier.
What payments need to be reported?
If your business provides Cleaning services, you need to report the payments you make to contractors for Cleaning services.
Similarly, if your business provides Courier services, you need to report payments you make to contractors for Courier services.
If an invoice you receive from a contractor includes both labour and materials, whether itemised or combined, you are required to report the total amount of the payment.
What details need to be reported?
The details you need to report for each contractor include:
- ABN (where known);
- name;
- address;
- gross amount you paid for the financial year (this is the total amount paid including GST); and
- total GST included in the gross amount you paid.
Depending on whether you report using the paper form or electronically, the ATO may also ask you to include additional information where it is known to you. This additional information includes the contractor’s phone number, email address and bank account details (where they are paid by electronic bank transfer).
You are required to report the total payments you make to contractors in the financial year in which the payments are actually made (i.e. on a cash basis).
The details you need to report are generally contained in the invoices you receive from the contractors you engage.
What payments do not need to be included in a TPAR?
There are specific payments you do not need to report in a TPAR, including:
- Payments for materials only;
- Unpaid invoices as at 30 June each year;
- Pay as you go [‘PAYG’] withholding payments, such as those you make to employees or under a voluntary agreement to withhold, as these amounts are already reported in your PAYG withholding payment summary annual report;
- Payments within consolidated groups. Each entity in the group will however, need to consider if they are a business that provides courier or cleaning services and whether they make payments to contractors outside the consolidated group for courier or cleaning services respectively. If so, they will need to lodge a TPAR in their own right;
- Payments made by individuals for private or domestic reasons.
What needs to be done now if you are not ready for the new TPAR requirements?
If you are not already ready for the new TPAR requirements you will need to ensure as quickly as possible that your accounting records and/or financial management software systems are setup in the correct manner to handle the TPAR reporting requirements.
Any delay / failure to do so may result in a large (and costly in both time and money) compliance problem when it comes time to prepare the first TPAR.
