Proposed reporting requirements from 1 July 2012

Federal Treasury recently released an exposure draft concerning the introduction of a significant reporting regime requiring annual reporting of payments by certain businesses in the building and construction services industry to the Australian Taxation Office.

This is an exposure draft only; however it does indicate significant reporting obligations are on the horizon for many in the building and construction services industry. Individuals without an ABN will not be required to report payments.

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.

Proposed Date of effect

It is proposed that these measures are to come in to effect from 1 July 2012.

What is to be reported?

Based on the exposure draft, businesses would be required to report actual payments made on an annual basis to contractors providing building and construction services.

Purchasers would not be required to report on payments to suppliers for the supply of goods only.

There is a test where there is a mixed supply of goods and services – however note that the supply of services is the primary focus of these proposals.

Details of report

A business that is required to make a report under these proposed regulations would be required to include the following details:

• the contractor’s name;
• the contractor’s ABN;
• the contractor’s address (if known);
• the total amount paid or credited to the contractor over the income year
• whether any GST has been charged;
• any other information the Commissioner may require.

Businesses are only proposed to provide an aggregate report for each contractor they make payments to during the income year.

Who do these rules capture?

Most participants in the building and construction services industry are potentially caught, including architects, landscape design, engineers, project managers and surveyors (and many others) will be covered by these measures.

Any business primarily in the building and construction industry is a purchaser and therefore potentially has a reporting requirement.

Based on the exposure draft, the purchaser must have an ABN, if the purchaser does not have an ABN; they are not required to report. Please note that if a supplier does not quote/provide an ABN, a business purchaser is generally required to withhold 46.5% tax from payments made.

All participants in these industries should be aware of these upcoming measures, and ensure that their systems and procedures are in place to record and report these matters in a prompt manner.