The Australian Tax Office (ATO) has been tracing payments to contractors via the data from its taxable payments reporting system (TPRS). It is estimated that over 60,000 Australian business are yet to lodge TPARs for the 2019-20 financial year.

The ATO has advised Australian businesses to come clean on the $172 billion worth of payments to contractors as it plans to crack down on non-compliance with the taxable payments reporting system.

It is compulsory for businesses who provide services across the building and construction, cleaning, and courier industries to lodge a TPAR annually. 

When the scheme was extended in 2020, businesses offering road freight services, information technology services, and security, investigation or surveillance services are now required to lodge TPARs, as well. 

The Taxable Payments Annual Report (TPAR) is an industry-specific report where businesses inform the Australian Tax Office (ATO) of the total payments made to contractors for services in that financial year. The data submitted is then used by the ATO to match the contractors’ income declarations to bolster their compliance efforts.

The ATO contends that the technology has granted the Tax Office a stronger view of the payments which have been made to contractors, and since its update in early March 2021, more than 158,000 businesses anticipated to lodge TPARs for the 2019–20 year have now lodged them.

“More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year to us. This data, combined with our sophisticated data and analytics capability, means our field of vision to detect unreported income is better than ever” says a spokesperson for the Australian Tax Office (ATO).

The TPRS, is anticipated to capture many taxpayers for the first time ever, the ATO has signalled it will now move to proactively contact contractors to make sure that income declared matches that provided to them by their employers. 

“Where we discover a discrepancy, our first step is always to contact the taxpayer or their tax professional to check they have fully reported these payments in their tax return” said a spokesperson for the ATO.

During extended lockdown periods and volatile business conditions, the ATO saw businesses contract out services at an increased rate. In August last year, the ATO announced that the resulting services would likely result in businesses that may never have needed to lodge a TPAR, have to do so by Friday 28th August 2020. 

The ATO revealed that it is also utilising TPRS data to check that businesses are operating under active Australian business numbers and are registered for GST where it is necessary for them to do so. 

There is currently a $6.7 billion shadow economy in Australia as a result of fuelled by tax evasion. The ATO believes that this is very unfair for contractors who do the “right thing” in their industries when some of their colleagues deliberately under-declare their income. 

Honest courier drivers do the right thing: they pay their rego, stick to the speed limit, pay their road tolls and pay their taxes.  It is totally unfair that some dishonest drivers get to skip the ‘toll booth’ and get an advantage over their honest competitors.