Contractors reminded to declare income from Sub-contracting
The Australian Taxation Office (ATO) has revealed it is using data from its Taxable Payments Reporting System (TPRS) to ensure that payments made to contractors have been properly declared.
Businesses that pay contractors in the courier, cleaning, building and construction, road freight, information technology, security, investigation, or surveillance services industries are required to notify the ATO of payments made to contractors annually.
ATO Assistant Commissioner Peter Holt said because of TPRS, the ATO now has a clearer view than ever before of payments made to contractors in these industries.
“More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year to the ATO. This data, combined with ATO’s sophisticated data and analytics capability, means ATO’s field of vision to detect unreported income is better than ever.”
The ATO is using the data to proactively contact contractors to make sure they have not forgotten to declare the income reported through the TPRS.
“Where ATO discovers a discrepancy, first step is always to contact the taxpayer or their tax professional to check they have fully reported these payments in their tax return,” Mr Holt said.
The ATO encourages taxpayers who have not declared or under-declared income from contract work to lodge an amendment request or speak to their registered tax professional for assistance.
The ATO is also using the TPRS data to draw attention to income from contracting work so that it can be easily added to tax returns at tax time. Information reported through TPRS also allows the ATO to check that businesses are registered for GST if required and are using valid Australian Business Numbers.
Jonathan drives a delivery truck on weekends as a contractor for a courier company, delivering garden supplies. He earned $40,000 in the 2019–20 financial year. Jonathan also works from Monday to Friday as a driver, as an employee truck driver, from which he earned $80,000. When he lodged his tax return, he only declared his salary and wages, and did not declare the payments received as a contractor courier driver.
A few months later, the ATO received a Taxable Payment Annual Report from the courier company that contracted Jonathan, reporting the $40,000 in income. ATO cross-matched the TPRS data with Jonathan’s tax return and noticed there was no business income declared. ATO then sent Jonathan a letter asking him about the discrepancy and reminding him that he will need to declare the income. Jonathan lodged an amendment and paid the difference in tax owed.
For further assistance, contact Expert Tax on 0449 952 855 or 1300 869 829.