ATO Warns of Contractor Payments

Posted 23 Aug '23

The ATO Takes a Firm Stance on Contractor Payments Reporting

The Australian Tax Office (ATO) is warning businesses not to delay reporting contractor payments. Those that don't adhere to the reporting deadline could face penalties and raise suspicions of “dodgy behaviour”.

The deadline for the Taxable Payments Annual Report (TPAR) is set for 28 August. Recent data reveals that the Tax Office has penalised over 16,000 businesses for not submitting their TPARs on time, with the average fine being around $1,110.

There’s also a growing concern about cash transactions that drive the shadow economy, which results in an estimated annual tax loss of $12.4 billion for Australia.

According to ATO Assistant Commissioner, Tony Goding, while penalties for late submissions are a given, it's just the tip of the iceberg.

“It is getting harder for businesses to hide from the ATO, like using cash payments to avoid tax, as the TPAR data gives the ATO the extra puzzle pieces it needs to catch-out dodgy behaviour,” he said.

He further emphasised, “If you are asking for cash and not declaring it to the ATO, you will receive a ‘please explain’ from the ATO and you will be penalised. It’s not a matter of ‘if’, it’s a matter of ‘when’.”

In the financial year 2022-23, the TPAR system documented a staggering $400 billion in payments to nearly 1.1 million contractors.

Among the industries that frequently employ contractors, the ATO have listed building and construction, cleaning, courier and road freight, IT, security, and investigative services.

The ATO increasingly identifies cash transactions through payment reports and other means.

“We use a range of information in the TPAR to check for red flags, like not including income, not lodging tax returns or activity statements, overclaiming GST credits or mis-using ABNs.” Goding explained.

One instance highlighted by the ATO was of a sole contractor in the cleaning sector. Despite claiming only $6,892 from government allowances and no business income or expenses, data revealed they had received over $80,000 from three distinct entities. Subsequent audits established that they had not declared these payments, leading to adjustments in their tax return and penalties.

At Trinity Advisory, we specialise in tax accounting, advisory services, and business coaching for small businesses located in and around Cairns (116 Mulgrave Road, Parramatta Park QLD 4870) and the Sunshine Coast (2/8 Maroochydore Road, Maroochydore QLD 4558).

Should you need any taxation or accounting advice for your business, get in touch with Trinity Advisory today. Our team of expert Business Accountants, Advisors and Coaches are here to help!

Ref: ATO website, Media releases, 21 August 2023

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