New ATO reporting requirement for building and construction businesses

In brief - Changes came into effect on 1 July 2012

On 1 July 2012 a new Australian Taxation Office (ATO) reporting requirement came into effect for businesses which are primarily in the building and construction industry.

Payments to contractors to be reported for data matching by ATO

Businesses which are primarily in the building and construction industry will now be required to report, on an annual basis, information about payments made to contractors for building and construction services. The first annual report is due in July 2013.

It is understood that the annual reports will be used by the ATO for data matching purposes as a means of ensuring that all income is reported by contractors.

New requirements apply to businesses which meet three criteria

The new reporting requirement will apply to any business that:

• is primarily in the building and construction industry (ie 50% or more of business activity relates to building and construction services in the current financial year or 50% or more of business income is derived from providing building and construction services in the current financial year)
• makes payments to contractors for building and construction services; and
• has an Australian Business Number (ABN).

Businesses which met the criteria the previous financial year

The reporting requirement will also apply in a given financial year to a business that has an ABN, makes payments to contractors for building and construction services and which derived 50% or more of its business income from providing building and construction services in the financial year immediately before the current financial year.

Contractor's details, payments and GST

If the new reporting requirement applies to your business, you will need to report the name and ABN (if known) of each contractor to which payments are made, the contractor's address, the gross amount paid inclusive of GST and the total GST included in the gross amount.

Start recording contractor payments immediately

The first reports are due in July 2013. It is important for affected businesses to take steps immediately to ensure that all information required to be reported about amounts paid to contractors is sufficiently recorded. This also applies to invoices which were issued prior to 1 July 2012 but which are not paid until on or after 1 July 2012.

If you require any advice in relation to the new reporting requirement or wish to discuss this article, please do not hesitate to contact us.