Small businesses in the construction sector are confused about their obligations under the ATO’s new reporting system and could risk not having the proper documents when lodgement dates arrive.
This is the warning from BDO’s national leader for corporate tax, Marcus Leonard, who told SmartCompany this morning SMEs are still confused as to their obligations.
“We have people coming to us and saying they don’t know what to do, who the new laws apply to, and so on,” he said this morning.
“It can be quite confusing to report. And many people aren’t actually aware and could risk being in breach of their obligations.”
The Federal Government introduced its reporting obligations this year and they commenced on July 1. They mandate that all building and construction businesses must report the total payments they make to each contractor for services provided. Payment reports need to be lodged by July 21 2013.
But Leonard says although larger businesses will have these reporting obligations as well, it’s smaller businesses which use contractors far more often and thus will bear an unequal weight of the reporting burden.
Many small businesses don’t have a sophisticated finance department and will have to keep track of these reporting obligations themselves. Leonard points out this could be a problem.
“In a typical scenario you’re using contractors, and they would give you invoices. The building company needs to report those in a year’s time, and if you don’t have them all then you won’t be meeting your obligations.”
“So what SMEs need to do now is have further systems in place to keep track of all of these.”
The system is made more complicated by the fact businesses don’t have to report invoices for equipment, only services. So if a contractor purchases an air conditioning unit, that invoice can be discarded, but if they perform a service of installing the unit, that must be delivered to the ATO.
The solution is a simple but frustrating one – businesses must make sure their record keeping is top-notch.
“Businesses are usually doing all the bookkeeping themselves and struggling to get everything together. So this underlines the importance of that system.”