Building and construction companies to report payments made to
Late last year, the Treasury released draft regulations whereby
businesses in the building and construction industry will need to
annually report payments made to contractors. The regulations apply
to a wide range of building and construction services, including
building alterations and demolitions.
Here, Taxation and Revenue special counsel Justin Byrne outlines
what building and construction companies need to know about the
The Treasury's draft regulations require businesses
operating primarily within the building and construction industry
to report any payments they make to contractors to the ATO on an
The reporting requirements will apply where there has been a
supply of building and construction services, or a combination of
construction goods and services in some circumstances.
Improving compliance in the building and construction
The draft regulations were introduced as a result of a 2010-11
Federal budget initiative to improve compliance with taxation
obligations amongst contractors in the building and construction
industry. ATO research has suggested that out of the six major
industries, building and construction was responsible for 60
percent of all tax related debt for the 2006 and 2009 income years.
The draft regulations follow on from a consultation paper issued in
May 2011, and are proposed to apply from 1 July 2012.
Who will the regulations apply to?
The regulations will apply to businesses that utilise the
services of a contractor if:
the business is 'primarily' in the building and
construction industry (the regulations will apply if a business
derives more than 50 percent of its income from 'building and
construction services' in the current financial year or two
most recent financial years);
both the business and the supplier have an ABN; and
building and construction services are supplied, or a
combination of goods and building and construction services are
supplied (and supplying the services is not merely incidental to
supplying the goods).
'Building and construction services' encompasses a wide
range of activities performed on, or relating to, buildings,
structures, works, surfaces or subsurfaces, from alterations to
demolitions. A list of included activities can be found in the
draft regulations, while the accompanying explanatory statement
contains further examples.
Where goods and services are supplied in combination, businesses
contracting the services will only be exempt from the reporting
requirements if the supply of services is simply incidental to the
supply of goods. For example, a tradesperson purchasing paint from
a store that also provides a tinting service will not be required
to report payments made to the store (as the tinting is an
Who is excluded from the regulations?
The regulations will not apply to:
payments between members of the same consolidated or multiple
entry consolidated group for income tax purposes;
payments made to individuals or entities without an ABN;
payments made to individuals or entities whose tax is withheld
under the PAYG system (eg employees).
How will payments be reported?
The draft regulations require businesses to report to the ATO
any payments made to contractors under division 405 of the
Taxation Administration Act 1953 (Cth). Division 405
requires quarterly reporting, and while the consultation paper
suggested that only annual reporting would be required, this does
not seem to have been adopted in the draft regulations.
Businesses will be required to outline the contractor's
name, ABN, address (if known), the total amount paid or credited to
the contractor over the income year, if GST has been charged, and
any other information required by the Commissioner.
Submissions on the draft regulations closed recently, and the
Government will now work to finalise the regulations, with a view
to implementation on 1 July 2012.
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