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Developers - Reporting Contractor Payments

Discussion in 'Accounting & Tax' started by Paul@PFI, 28th Jul, 2015.

  1. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
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    2,358
    Location:
    Sydney
    Its an often overlooked area of tax compliance but important.

    If you have an ABN (or are required to have one) and you make payments to contractors in the building industry then each tax year you must report payments made to each contractor to the ATO. I'm not talking about some small reno etc. I'm talking about developer activities where there is an expectation of future income.

    Typical scenario is this...You buy land, develop and build some units etc on the land and sell them off a year or so later. Even building a duplex of backyard sub-division may be caught. Scale isn't a factor in the reporting obligations. It applies to paymnets - Not whether there is a business etc. Some exceptions of course such as own home etc. But a subdiv and build where a sale is planned is caught. You may be affected this year - And even next year. Sure you might not have a sale yet. It may not even be profitable etc. Doesn't matter. Its when you pay the contractors.

    This reporting obligation is very broad and intended to act as a way to prevent contractors defrauding the Commonwealth. It put the onus on the payer to report who they paid. Its based on all payments made to contractors excluding materials-only supply. Supply of labour + materials must be reported. eg roof tiles bought from Boral - Not reported. Payment to a tiler who supplies tiled and installs...report it all.

    Payment reports will need to show for each contractor their ABN etc and the total paid to them. So diligent record keeping is a must.

    The form is due by 28th August. Penalties apply. The ATO are taking a increased focus on this area of compliance as it has yielded a huge number of contractors who seem to have a disparity been contractor reported income and the income in their tax returns. The ATO seem to be cross checking GST reported on sales and seeking further information from developers who haven't reported payments. Its not something to ignore.

    This is just one further area that explains the need for reliable property tax advice from time to time. Early advice may assist you to keep the relevant records so that profit isn't miscalculated and so that GST and these sorts of reporting issues are made easy. In some instances I recommend use of software like MYOB which can assist this reporting etc

    https://www.ato.gov.au/Business/Bui...porting---building-and-construction-industry/
     
    Perthguy and Terry_w like this.
  2. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

    Joined:
    24th Jun, 2015
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    Location:
    Philippines
    This has been applicable for the past few years so any accountant with developer clients would have ensured they are well on top of it. My biggest client has a report which runs to about 30 pages.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    They can get quite long that's for sure. So many tiny boxes. Not a great form. It should be electronic...No, You must use the ATO originals and yet these only allow so many reports ....And then sorting the material only supplies from those that include labour etc. Its not uncommon to get later ATO queries ... someone who has borrowed his mate's ABN and details don't match up. ATO want a copy of invoices etc.

    I still regularly encounter devs who change intention or haven't sought advice earlier enough who seem to be unaware. Or hope to be unaware. Or someone who thinks you report when you sell. I have received three calls today after the post.