Reporting payments to Contractors in the Building & Construction Industry

From 1 July 2012 businesses in the building and construction industry need to lodge an annual report with the ATO advising the total payments made to each contractor for building and construction services during the year.  This report is required to be lodged in July each year.

 The aim of the system is to improve compliance with tax obligations by those contractors who are currently not doing the right thing. The information reported about payments made to contractors will be used by the ATO for their data matching to detect contractors who have not:

  • lodged tax returns
  • included all their income on tax returns that have been lodged.

You need to report payments you make to contractors for building and construction services.

Building and construction services include any of the activities listed below if they are performed on, or in relation to, any part of a building, structure, works, surface or sub-surface:

  • Alteration
  • Assembly
  • Construction
  • Demolition
  • Design
  • Destruction
  • Dismantling
  • Erection
  • Excavation
  • Finishing
  • Improvement
  • Installation
  • Maintenance
  • Management of building and construction services
  • Modification
  • Organisation of building and construction services
  • Removal
  • Repair
  • Site preparation

For each contractor, you need to report the following details each financial year:

  • ABN, if known
  • name
  • address
  • gross amount you paid for the financial year (this is the total amount paid inclusive of GST)
  • total GST included in the gross amount you paid.

 The details you need to report will generally be contained in the invoices you receive from your contractors.

Payments you do not report

Payments for materials only

You are not required to report on payments if the invoices are for materials only, such as building supplies and materials.

Unpaid invoices as at 30 June each year

Do not report any unpaid invoices as at 30 June each year. For example, if you receive an invoice in June 2012, but you do not pay that invoice until some time in July 2012, you report that payment in the 2012-13 Taxable payments annual report.

Pay as you go withholding payments

You do not report payments that are required to be reported in a PAYG withholding annual report - for example, payments to:

  • employees
  • workers engaged under a voluntary agreement to withhold
  • workers engaged under a labour hire or on-hire arrangement
  • contractors who do not quote an ABN.

If amounts are withheld because a contractor did not quote an ABN, you can report the details in the new Taxable payments annual report instead of the PAYG withholding where ABN not quoted annual report.

If an ABN is not provided, the payer must withhold under the existing pay as you go withholding arrangements. For more information, refer to No ABN withholding - questions and answers.

 Payments for private and domestic projects

You will not need to report if you are a home owner making payments to contractors for building and construction services - for example, if you are building or renovating your own home.

Example 1: Home owner paying for building and construction services

Kristyn, who has an ABN for the purposes of running a bookkeeping business, manages the construction of her new home and makes payments directly to the contractors. Kristyn will not be required to report payments she makes to contractors as she is undertaking the activity in a domestic capacity and not as a business.

Payments within consolidated groups

If you are in a consolidated group or multiple entry consolidated group for income tax purposes, you do not need to report payments you make to another member of that same consolidated or multiple entry consolidated group. This is because members of a consolidated group or multiple entry consolidated group are effectively taxed as a single entity.

Example 2: Payments within consolidated groups

Brick Co and Paint Co are both members of the same consolidated group for income tax purposes. Brick Co provides building services and makes a payment to Paint Co for painting its building project. As Paint Co and Brick Co are in the same consolidated group, Brick Co will not have to report on the payment made to Paint Co for the provision of painting services. However, it will have to report on payments made to entities outside the consolidated group for the supply of building and construction services.

The first annual report is due 21 July 2013 for payments made in the 2012-13 financial year.  In this first year of reporting, businesses that lodge their Business Activity Statements (BAS) quarterly are given a week's extension to lodge the report by 28 July 2013.

The ATO have advised that the 2013 annual report can be lodged:

  • Online through the Business or Tax Agent Portal or via Standard Business Reporting enabled software;
  • On electronic media such as DVD or USB if the business cannot lodge online (for the first year only); or
  • On paper using ATO printed forms.