Reportable Payment System to be extended by the ATO
The government plans to extend the Taxable Payments Reporting System (TPRS). Entities that provide road freight, IT, security, investigation, or surveillance services will be affected. TPRS are designed in part to combat the rise in the Black Economy.
So what is TPRS?
TPRS is a transparency measure that was first applied to the building and construction industry. Businesses in this sector are now required to report payments they made to contractors for services to the ATO.
This information is used in data-matching programs to ensure the contractors were meeting their tax obligations. Previous ATO evidence indicates that the program has improved contractor tax compliance in the building and construction industry.
The government has since attempted to expand the TPRS to contractors in the courier and cleaning industries ahead of the current planned expansion into road freight, IT, and security industries.
Industries in the sight of the ATO.
The use of the word “road freight” covers any service where goods are transported over road. It excludes any other modes of freight transportation (eg boat or aeroplane). However, this qualification is not intended to apply to courier services. Courier Services may involve the transportation of goods other than on road, such as by bike or train.
IT services are any services provided in relation to computer hardware or software. They include services that are provided remotely through the internet. Services that support or modify the operation of hardware of software are included.
In the context of the proposal, IT services do not include the purpose or lease of hardware or software unless the seller or lessor modifies it for the purchaser or lessee or develops specific software for them.
Some examples of IT services include: technical support, internet and web design consulting, computer facilities management, network systems design and integration and software consulting.
Security services to be captured under the expanded TPRS regime would include lock-smithing,burglary protection, body guards, security guards, armoured cars, and any services which can be provided to protect individuals or property.
Investigation services refers to specific investigations into persons or matters and would typically be conducted by a detective or an enquiry agency(eg investigations conducted or enquires made to assess the veracity of insurance claims). Similarly, surveillance services refer to a general watch or observation maintained over an area or location by one or more persons or by using devices (eg motion detector alarms, cameras, or recorders).
What is Proposed
Any businesses with an ABN that meet the above definitions will be required to report contractor transactions to the ATO.
This includes any transactions where the business has provided consideration (within the meaning of the GST Act). Consideration includes not only monetary payment, but can also include other forms of non-cash benefits and constructive payments. Under this proposed regime, businesses would generally be required to report information to the ATO annually, in the approved form.
Will your business be affected?
If your business is in one of the sectors that will be affected by the expanded TPRS regime or you are a contractor dealing with a business in those industries, we can help you understand what you need to report and how you will be affected. Contact us today.