Businesses that provide road freight services have increased tax compliance obligations as they are now subject to the Government’s Taxable Payments Reporting System (TPRS).
These businesses must now lodge a Taxable Payments Annual Report (TPAR) for each financial year that they have an ABN and make any payments to contractors for road freight services provided on behalf of the business.
The first TPAR for payments made to contractors from 1 July 2019 to 30 June 2020, will be due by 28 August 2020.
What is the TPRS?
The TPRS was first introduced on and from 1 July 2012 as a tax transparency measure applicable to the building and construction industry, enabling the Australian Taxation Office (ATO) to use its data-matching systems to determine if contractors are operating in the black economy.
The TPRS was extended to businesses engaging contractors in the courier and cleaning industries from 1 July 2018. The TPRS has now been extended to businesses providing road freight, security, investigation or surveillance, and information technology services. These additional industry sectors were identified as being high-risk by the Black Economy Taskforce.
The ATO recently stated that the TPRS protected $2.7 billion from being lost to the black economy in the building and construction industry in the 2015-16 financial year. Additionally, 1.45 million transactions with a reported value of $157 billion have been matched to 479,000 contractors.
Is your business impacted?
If your business provides road freight services (even if it is only part of the services you offer), you will be subject to the TPRS. The ATO broadly defines ‘road freight service’ to include the transportation of freight by road, the renting of trucks with drivers for road freight transport and road vehicle towing services.
Road freight services would include, but are not limited to:
- furniture removal;
- log haulage;
- road freight forwarding; and
- truck hire services (with driver).
Road freight services do not include the following:
- passenger transport services (eg buses and taxis);
- courier services;
- operation of road freight terminals;
- providing crating and packing for road freight transport; and
- leasing or hiring trucks without drivers.
Where a road freight service is used to deliver goods, and the freight service is merely incidental to the supply of the goods, this service does not need to be reported. In contrast, if the delivery is a significant component of the supply of the goods, it will need to be reported.
What information must be included in the TPAR?
The TPAR informs the ATO about payments that are made to contractors, which can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.
The details you need to report for each contractor include:
- their ABN (where known);
- name (business name or individual’s name);
- address; and
- total amounts for the financial year of the:
- gross amount paid (including GST plus any tax withheld);
- total GST you paid them; and
- total tax withheld where ABN was not quoted.
The TPAR will be due by 28 August each year and maybe lodged online or via paper form.
Are there any reporting exemptions?
You do not need to lodge a TPAR if the total payments you receive, from your customers in a financial year that relate to the provision of road freight services is less than 10 percent of your current or projected GST turnover (ie the entity/business pays contractors to provide road freight services, but will not need to report this if the income it receives from its customers that relates to the road freight service is less than the 10% threshold).
If you consider this exemption applies to you, it is imperative that you retain detailed workings if the ATO reviews your compliance under the TPRS. The ATO has stated that even if the exemption applies, businesses may still voluntarily lodge a TPAR.
How can Rigby Cooke help?
While the purpose of the TPRS is to enable the ATO to identify whether contractors are operating in the black economy, the actual reporting obligation falls on your business. This new compliance burden applies to your business irrespective of whether or not your contractors are correctly reporting their tax liabilities. If you fail to lodge a TPAR by the due date, penalties may be imposed.
We can assist you in determining if the TPRS applies to your business and in identifying which payments must be reported. Where road freight services are used to deliver goods, difficult issues may arise in identifying whether the freight service is merely incidental, or a significant component of the supply of goods.
The Government has allocated significant resources to its Black Economy Taskforce and we anticipate that the ATO will be actively undertaking compliance reviews. We note the ATO’s Corporate Plan 2019-20 states that it will address the black economy with increased enforcement.
We recommend that impacted businesses act now to assess their obligations and ensure they keep appropriate records of payments to contractors.
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