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ATO chases $172bn in undeclared contractor income

The ATO has urged businesses to come clean on $172 billion worth of payments to contractors as it gets tough on non-compliance with the taxable payments reporting system.

The ATO traced payments to contractors through data from its taxable payments reporting system (TPRS), resulting from estimates that over 60,000 Australian businesses still have not lodged TPARs for the 2019–20 financial year.

Businesses providing services across the building and construction, cleaning, and courier industries are obligated to lodge a TPAR annually.

After the program was extended last year, businesses providing security, IT services, road freight services and investigation or surveillance services now have to lodge TPARs, too.

The technology has allowed the Tax Office a clearer insight of payments made to contractors, and since its update in early March, more than 158,000 businesses required to lodge TPARs for the 2019–20 year have now done so.

More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year. This data, along with the ATO’s sophisticated data and analytics capability, means their line of vision to spot unreported income is better than ever.

The ATO has revealed that it will now begin to proactively contact contractors to confirm that income declared matches that provided to them by their employers.

Where a discrepancy is discovered, the ATO’s first step is to contact the taxpayer or their tax accountant to check they have correctly reported these payments in their tax return.

Through prolonged lockdown periods and unstable business conditions, the ATO saw businesses contract out services at an increased rate. In August last year, these contracted services would see businesses that may have never needed to lodge a TPAR, have to do so by 28 August 2020.

The ATO advised that they are also using data to check that businesses are operating under active Australian business numbers and are registered for GST where required.

Due to a $6.7 billion underground economy fueled by tax evasion in Australia, it is unfair for the contractors who are doing the “right thing” in their industries are up against their colleagues deliberately under-declaring their income.

If you require any assistance with your taxable payments annual report, please contact our office.

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