The Federal Government has released a consultation paper on the proposed introduction of a reporting regime for payments made by businesses to contractors in the building and construction industry.
The proposal was originally announced in the 2011-2012 Federal Budget and is intended to commence on 1 July 2012. The Federal Government intends to introduce a similar reporting regime in due course for those operating in the commercial cleaning industry.
The proposal is in response to the Australian Taxation Office (ATO) identifying a high level of non-compliance in the building and construction industry. The issues identified include non-compliance related to:
- GST requirements
- Record keeping requirements
- Personal Services Income rules
- Engagements under ‘sham’ contracting arrangements for effective employees
- Reporting of Australian Business Numbers (ABNs)
- Non-reporting of cash transactions.
The objective of the proposed reporting regime is to provide the ATO with sufficient information to enable it to implement data matching projects. These projects would identify taxpayers for audit or review, but also identify those that require assistance and education about their compliance obligations.
The consultation paper raised various issues, including:
- the payments that should be subject to reporting
- the Payers who should be required to report
- the Payees who should be reported on
- what is required to be reported and
- how the reporting regime will operate.
The proposed regime will require businesses to report annually to the ATO regarding the amounts paid to, and the ABN of, contractors in the building and construction industry. The regime is therefore an extension of the business’ existing PAYG Withholding annual reporting requirements.
The requirement to report will be an additional administrative task. However, it should noted that the information required to be reported is not additional to what is already required to be provided, collected and recorded under existing taxation legislation.
Further, the Federal Government has advised that the proposed reporting regime will not introduce any new requirements for contractors to report payments made to them. The reporting regime will assist the ATO to monitor compliance by such contractors in disclosing their taxable income and GST obligations.