The Taxable Payments Annual Report, also known as the TPAR is due to be lodged to the Australian Tax Office by 28th of August for the Financial Year just completed.
WHO NEEDS TO REPORT?
WHY DOES THE AUSTRALIAN TAX OFFICE GATHER THIS INFORMATION?
The purpose of this reporting is to provide the ATO with information so that they can verify if contractors are reporting all of their income and their GST correctly.
WHAT TYPE OF PAYMENTS DO I NEED TO REPORT?
You need to report payments to contractors ie. any businesses, whether companies or sole traders, that have invoiced you for their services relating to your industry.
For example, if you’re in the Construction industry, you would report the payments you’ve made to your plumbing contractor because they are a contractor/business charging you for their services. Even if this contractor also charged you for some materials, you would be reporting the total amount of the payment.
But for a supplier such as Bunnings where you’ve purchased materials only you wouldn’t need to report them.
Similarly, in the Cleaning industry, if you subcontract your work to some other cleaners that would be reportable.
WHAT DETAILS TO I NEED TO REPORT?
For each contractor you need to report the ABN, Name, Address, Gross Amount paid for the year including GST and the total GST included in the gross amount.
Xero makes preparing this report very easy so long as you’ve collected and entered your supplier data throughout the year and flagged your sub-contractors.
HOW TO STREAMLINE YOUR TPAR REPORTING
In order to make your TPAR reporting quick and painless at the end of year we recommend ensuring the following practices are in place in your bookkeeping system.
- Ensuring you obtain valid tax invoices from your suppliers
- Validating the ABN and GST registration status on new suppliers using the ABN lookup tool
- Create a Contact Group called ‘Contractors’ in Xero
- Entering full details of your supplier contacts into your system eg. Xero such as name, address and ABN.
- Allocate all of your supplier contacts that would be reportable to the Contractors contact group. This group is going to be used later to produce the TPAR. You can also use account codes eg. SubContractors to identify reportable transactions.
- Ensure all invoices are entered right up to the end of financial year.
- Reconcile your bank account to the end of the financial year to ensure you haven’t missed anything.
- Ideally do this TPAR checking before you’ve lodged your April to June BAS and income tax return because if errors are found it may mean adjustments to prior periods are needed in order to report accurately.
Xero allows filtering of payments by Contact Group and Account code to complete the TPAR report
Each bookkeeping system differs in terms of how they allow you to report for your TPAR but most should allow you to automate the production of a file that can be lodged electronically to the ATO through the Business Portal or by your BAS or Tax Agent.
Reference: ATO Website