The Australian taxation laws can be very complicated to navigate especially for independent contractors and small construction company owners. That’s why it is imperative that you are aware of your obligations as a builder, so you can avoid any mistakes that can lead to serious legal and compliance issues.
To help you out, we detailed in this infographic the tax requirements by the Australian Taxation Office (ATO) which Australian construction business owners should abide by.
1. GST Reporting
If your construction business has a Goods and Services Tax (GST) turnover of $75,000, you will need to register and report for GST. If not, registering for GST is optional.
Your GST reporting and payment period will be one of the following:
- Monthly – if your GST turnover is $20 million or more.
- Quarterly – if your GST turnover is less than $20 million – and ATO has not told you that you must report monthly.
- Annually – if you are voluntarily registered for GST. That is, you are registered for GST, and your GST turnover is under $75,000 ($150,000 for not-for-profit bodies).
BAS – If you are a business registered for GST you need to lodge a business activity statement (BAS).
- Your BAS will help you report and pay your:
- goods and services tax (GST)
- pay as you go (PAYG) instalments
- PAYG withholding tax
- other taxes.
When you register for an Australian business number (ABN) and GST, ATO will automatically send you a BAS when it is time to lodge.
2. Taxable Payments Annual Report
The Taxable payments annual report (TPAR) indicates the payments you have made to contractors for providing services. Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.
TPAR applies to business-to-business transactions made in the Building and Construction Industry.
It does not apply to private individuals engaging a subcontractor for building services.
The purchaser, or business engaging contractors, is required to provide a report for the entire year’s transactions, from 1 July to 30 June. The report is due by 28th August each year.
Who Are Required to Report for Taxable Payments?
You are required to lodge a Taxable payments annual report if you:
- Make payments to contractors for building and construction services, and
- Have an Australian business number (ABN).
Your business is considered to be mainly in the building and construction industry if any of the following factors apply:
- In the current financial year, 50% or more of your business income is earned from providing building and construction services
- In the current financial year, 50% or more of your business activity relates to building and construction services
- In the fiscal year immediately before the current fiscal year, 50% or more of your business income was earned from providing building and construction services.
What Has to be Reported?
- Contractor’s Australian Business Number
- Contractor’s Name
- Contractor’s Address
- Total amount paid or credited to the contractor over the income year
- Amount of any goods and services tax (GST).
What Payments Have to Be Reported?
Building and construction services include a range of activities identified by the ATO if they are performed on, or in relation to, any part of a building, structure, works, surface or sub-surface. Following is a list of activities provided for guidance by the ATO:
- alteration
- improvement
- assembly
- installation
- construction
- maintenance
- demolition
- management of building and construction services
- design
- modification
- destruction
- organisation of building and construction services
- dismantling
- removal
- erection
- repair
- excavation
- site preparation
- finishing
Where invoices received include both labour and materials, you must report the whole amount of the payment unless the labour is incidental. A payment for labour is considered to be incidental if the labour component is immaterial to the actual supply of the material.
Aside from seeking the expertise of tax agent, equally important is to have a reliable industry-specific construction management solution with accounting software built-in to make the process of preparing and completing your own BAS and TPAR easier and faster.
With Bizprac, all the financial reports your accountant needs are at his fingertips. He can be given access to log in remotely at tax time to check your accounts, saving both of you time and saving you a costly accountant’s bill.
If you would like more detailed information on this very important aspect of your business, we would love to hear from you. Please visit our website at staging.bizprac.com or contact our sales team at 1800 009 970
