Due 28 August every year
If you are in building and construction and you pay subbies, you probably do. The report itself takes ten minutes. Making sure it is not quietly missing half your contractors is the part nobody writes about, so that is what most of this page is.
First, are you in scope
The taxable payments reporting system covers a specific list of industries. If you provide services in one of these and you paid contractors for those services, you are in the frame:
- Building and construction
- Cleaning
- Courier and road freight
- Information technology
- Security, investigation or surveillance
For building and construction there is a further test on how much of your business it actually is. The ATO looks at whether 50% or more of your income, or 50% or more of your business activity, comes from building and construction services, in the current year or the prior year.
The one that surprises people
You do not have to think of yourself as a builder. A landscaper, a fencer, an earthmoving contractor or a plant hire business can all be caught, because building and construction services is a broad list. The question is what you do and what proportion of the business it is, not what is written on the ute.
If you are a mixed business, this is worth ten minutes with someone rather than a guess, because the answer can change from one year to the next.
Running it in Xero
Xero builds the report from rules you set, and that is the thing to understand before you start. It does not go looking for your contractors. It reports the ones your rules capture, and it will tell you the report is finished either way.
Get your contractors into a contact group first
Before the report will do anything useful, Xero needs to know which of your suppliers are reportable contractors. That is done with a contact group, and it is the step that quietly decides whether your report is complete.
Watch out: this assumes you already know who is reportable. Anybody you forget is simply absent from the report, and nothing on screen will point at the gap.
Open the Taxable Payments Annual Report
It lives under Reports. Set the financial year you are reporting for, which is the year that ended on 30 June.
Set your report rules
Rules tell Xero which accounts and which contacts to pull in. A subbie coded to an expense account your rules do not cover will not appear, however obviously he is a contractor.
Watch out: there is a ceiling on how many rules you can have. That is fine for a handful of trades and awkward for a business with dozens of supplier accounts, which is common once you count every plant hire firm and fabricator.
Clear the Needs Attention list
Xero flags contacts it has captured that are missing an ABN or an address. Fill those in and the flags clear.
Watch out, and this is the important one: Needs Attention only checks the contacts your rules already caught. It cannot flag somebody who was never picked up. An empty Needs Attention list means the details are tidy, not that the report is complete.
Check it against your own numbers before you lodge
This is the step Xero does not prompt you to do, and the one that actually protects you. See the next section.
Lodge it
You can lodge straight from Xero in most cases, and it will confirm when it has gone. There are situations where it cannot, including very large reports, payees overseas, and nil reports, and in those cases it has to go another way.
The completeness check nobody writes about
Xero finishes with a message telling you the job is done. What it cannot tell you is whether the report includes everybody it should. Lodging something that looks complete and is materially short is worse than lodging late, because the ATO matches your report against what the contractor declared in their own return.
Three checks, twenty minutes, once a year:
- Run your supplier list for the year and read it. Not the report, the whole list of who you paid. Go down it and ask of each one, did this person provide labour on a job. That is a different question from whether they are in your contact group.
- Look for the ones who supply both. A steel fabricator or a plant hire firm who supplied materials on one job and labour on the next is the classic miss, because they get coded to whichever account fitted at the time.
- Compare the total to last year. If your subbie spend was similar but the report is half the size, something is not being captured. That single comparison catches most of it.
Cash jobs
Payments to contractors are reportable whether you paid them by bank transfer or in cash. If it is not in Xero it will not be in the report, and that is not a defence.
Questions we get asked
Do I report the whole invoice or just the labour?
This is the most common question and it is worth getting right rather than guessing, because the two answers can be thousands of dollars apart on a single supplier. Ring us with an example invoice and we will tell you how to treat that supplier consistently.
What if a subbie had no ABN?
Then you may have had a withholding obligation at the time you paid him, which is a separate and more expensive problem than the TPAR. Worth raising it now rather than at the report.
I have never lodged one and I think I should have.
Common, and fixable. Prior years can be lodged. Going to the ATO with them rather than waiting to be asked is a materially better position, and the first step is working out which years are actually required.
My subbies are all companies.
Still reportable. The report is about payments for services, not about what structure the payee uses.
Does the TPAR mean I owe them super?
Different question with a different test, and plenty of businesses that lodge a TPAR also have a super obligation they have not noticed. Worth checking with our contractor super checker.
Want us to just do it?
We lodge these for trade businesses every August. If you would rather hand it over, or you want someone to check the one you have prepared before it goes, that is a short job.
Level 1, 561 Olive Street, Albury NSW 2640. Registered Tax Agent 20651000.
The taxable payments annual report is due by 28 August each year. The industries covered, and the 50% test for building and construction services, are set out in the ATO’s guidance on working out if you need to lodge a TPAR. This page is general information rather than advice about your business, and whether a particular supplier or payment is reportable depends on the facts of that arrangement.
Want us to lodge your TPAR?
TPAR catches out plenty of trade businesses, because the contractors you paid are not always the ones you remember paying. We can check what Xero has picked up and lodge it for you. It is part of the compliance we run through the year for trade and contractor businesses.
