Contractor payments is an area that has concerned the Tax Office for quite some time now. Contractors come and go and they tend to be what might be termed a fluid workforce. They do, of course, have tax obligations to meet, as do those that employ their services.
A contractor can be a sole trader (individual), partnership, company or trust.
Businesses in the building and construction industry that pay contractors for building and construction services have their own reporting requirements under the law. But the contractor payments issue extends well beyond just that industry.
Now word comes that the ATO is to continue to acquire details of entities that receive contractor payments from other businesses for the 2013-14, 2014-15 and 2015-16 financial years.
This is the continuation of an ongoing program where the ATO will obtain data from businesses that are subject to compliance activities conducted by the employer obligations area (which would cover matters such as PAYG withholding and reporting, super guarantee reporting, FBT reporting, etc) within the ATO. Data may also be collected from other businesses associated with the primary businesses.
The kinds of data the ATO will continue to collect include:
- ABN of the payer business;
- ABN of the payee business (ie the contractor);
- Name, address and telephone details of the contractor;
- Dates of payments to the contractors; and
- Amounts paid to the contractors (including details of whether the payment included GST).
It is estimated that records for approximately 25,000 entities will be obtained each year, including the records for approximately 12,500 individuals. These records will be electronically matched with certain sections of ATO data holdings to identify non-compliance with registration, lodgment, reporting and payment obligations under taxation laws.
The purpose of the program is to ensure that taxpayers are correctly meeting their taxation obligations in relation to contractor payments. The program seeks to:
- identify and address contractors that may not be meeting their taxation obligations, including registration, lodgment of tax and other returns and reporting;
- verify the integrity of the information held on the Australian Business Register to assist the Registrar develop educational and compliance strategies;
- obtain intelligence to identify risks and trends about contractors that may not be complying with their taxation obligations; and
- better tailor ATO educational products and services to address identified areas of concern and give more certainty to taxpayers in managing their obligations.
Contractors are an essential part of the overall economy, but they are also part of the tax system and the ATO is keen to ensure they comply with the tax laws.
Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.