We previously reported how businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year to the Australian Taxation Office.
These measures are now law, and affected business are required to report certain payments to the ATO.
The proposed measure is a result of the ATO identifying significant levels of non compliance with taxation obligations amongst contractors in the building and construction industry.
From 1 July 2012, you need to report if all of the following apply:
- you are a business that is primarily in the building and construction industry
- you make payments to contractors for building and construction services
- you have an Australian business number (ABN).
Businesses in the building and construction industry are considered to be a ‘reporting business’ if any of the following apply:
- in the current financial year, 50% or more of your business activity relates to building and construction services
- in the current financial year, 50% or more of your business income is derived from providing building and construction services
- in the financial year immediately before the current financial year, 50% or more of your business income was derived from providing building and construction services.
In most cases, the 50% test will be easy to answer, the more difficult situations involve ‘mixed’ businesses – please contact our office if assistance is required regarding this test.
Details you need to report
Where the measures apply, for each contractor, you need to report the following details each financial year to the ATO (using form NAT 74109):
- ABN, (if known – generally must have) – please note that if a payment is more than $75 (GST Exclusive), and you don’t have the supplier ABN, then you are generally required to withhold 46.5% of the payment.
- gross amount you paid for the financial year (this is the total paid including GST)
- total GST included in the gross amount you paid.
The details you need to report will generally be contained in the invoices you receive from your contractors.
Who do these rules capture? Some examples include:
Architectural work (including drafting and design)
Elevator and escalator installation and work
Irrigation system construction
Landscaping construction (including paving and design)
All participants in these industries should be aware of these measures, and ensure that their systems and procedures are in place to record and report these matters in a prompt manner.
Please contact DKP office on 03 9023 9370 should there be any questions.