Tax Office Cracking Down on Building Contractors
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According to a leading accounting firm, The Australian government has targeted the Building Industry in its first push to limit the number of independent contractors in Australia.
The Labour government, lead by Julia Gillard, is concerned that people are becoming independent contractors instead of employees and that this is leading to less influence (and revenue) from the tax office. After they have attacked the building industry, they have specified that commercial cleaning, information technology and transport are next on their hit list.
Starting July 1, 2012 the Australian Tax Office will now require members of the Building Industry to disclose all payments that have been made to contractors and sub-contractors. This means that Builders will need to report to the government the names and ABN’s of all of the contractors that they use, and how much each contractor was paid. The tax office will then match up this information with the tax returns of each contractor to ensure that:
- Every contractor has disclosed all income that they have received for the year on their tax return.
- No contractor has earned more than 80% of their income from a single source.
Of course, the ATO will be pursuing the contractors that it catches out.
How this new contractor reporting regime will work
The details of this new regime are not completely finalised, however they have outlined the following:
What payments are subject to reporting?
Payments that are in whole or in part for the supply of building and construction services will be subject to reporting.
Payments that are for the supply of goods or materials, or payments of salary or wages for employees are not captured.
Who is subject to reporting?
Any contractor or subcontractor engaged in the building and construction industry that quotes their ABN to the purchaser, and receives payment for building and construction work, will be subject to the reporting.
What is your responsibility?
You are required to report if you are a business (including sole traders and contractors) wholly or principally engaged in the building and construction industry. If you are an owner-builder you will not be required to report.
How often do you have to report?
Once per year. You will need to fill out a “Division 405 Report” that contains the information that identifies that supplier and the payments you made to that supplier.How does Service Central membership help?All active members of Service Central already meet the ATO independent contractor rules. By being a Certified member of Service Central, we maintain records of your ABN, qualifications and insurances. We also make your business accessible to many different customers, a key ‘legal’ definition of Independence.
Where do you get advice?
You will need to speak to your accountant about this big change. If you do not have a current accountant, or do not have the confidence that your accountant will know much about this new tax regime change, then post a job request for an accountant through Service Central.
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