Are you Aware of Your Tax Reporting Requirements?
Following the first month of the new financial year, tax is at the forefront of most business owner’s minds. Being a small business owner through tax time can be demanding due to the many reporting requirements, particularly for those in the building and construction industry who engage contractors.
As a business owner it is essential that you are aware of your reporting requirements to the ATO. The financial consequences for failing to meet your reporting requirements can have serious impacts on the profitability of your business.
In the 2012/2013 financial year, the ATO implemented contractor payment reporting requirements for business owners within the Building and Construction industry. Contractor reporting was implemented to curb the amount of contractors avoiding income tax and GST obligations.
Business owners are required to submit a taxable payments annual report, which provides the total payments that have been made to contractors for the relevant financial year.
The annual report is utilised by the ATO for the following reasons:
- To determine what percentage of the financial year the contractor performed services for your business;
- As a mechanism to match contractors who have failed to lodge tax returns;
- To ensure that contractors have reported their total income for the financial year; and
- To detect invalid ABNs utilised by contractors.
As a result of the taxable payment reports submitted by business owners for the 2012/2013 financial year, the ATO has reportedly contacted approximately 250,000 contractors and identified over $2.3 billion in outstanding liabilities.
The consequences for a business owner failing to comply with the contractor reporting requirements involve financial penalties being levied by the ATO. The financial penalty levied by the ATO aims to reduce business owners placing the administration of the tax system at risk through failing to provide information necessary to ensure that contractors meet their obligations.
It is important as a business owner to ensure that you perform the following:
- Engage with your accountant to accurately complete the taxable payments report; and
- Ensure that you accurately report the total amount of payments to contractors for materials and labour.
How we can help
We would be happy to assist you in understanding your reporting requirements as a business owner within the Building and Construction industry. Get in touch with someone from our office today if you require legal advice or would like us to work with your accountant on this issue.