From 1 July 2018, if you are a business that provides courier or cleaning services you will need to report payments you make to contractors if:
· the payments are for courier or cleaning services
· you have an Australian business number (ABN).
Contractors can be sole traders (individuals), companies, partnerships or trusts.
Payments must be reported to the ATO each year using the Taxable payments annual report.
Businesses that are required to report will need to collect the relevant information from 1 July 2018. The first annual report will be for the 2018-19 financial year and is due by 28 August 2019.
Work out if you need to report
If you’re a business that provides courier services, you need to report payments you make to contractors that are wholly or partly for courier services.
Courier services include activities where items or goods are collected from, and/or delivered to, any place in Australia using a variety of methods including by truck, car, station wagon, van, ute, motorcycle, motorised scooter, bicycle or other non-powered means of transport, or on foot.
Courier services do not include:
- passenger transport services e.g. buses and taxis
- transporting of blood, blood products, organs or tissue
- freight transport.
Example 1 – Couriers
ABC Couriers Pty Ltd (ABC) is a business with an ABN and provides parcel and delivery services to a range of clients. ABC engages 4 contractors throughout the year to make deliveries. Lee is one of these contractors and provides ABC with an invoice for the deliveries he completes. As a provider of courier services, ABC will need to prepare and lodge a taxable payments annual report detailing payments it makes to contractors, including Lee, that undertake courier activities for them.
If you’re a business that provides cleaning services, you need to report payments you make to contractors that are wholly or partly for cleaning services.
Cleaning services include any of the following activities undertaken on a building, residence, structure, place, surface, transport/vehicle, industrial machinery or equipment and for events:
- · Interior cleaning
- · Exterior cleaning (except sand blasting or steam cleaning)
- · Carpet cleaning
- · Chimney cleaning
- · Gutter cleaning
- · Road sweeping and street cleaning
- · Swimming pool cleaning
- · Park and park facilities cleaning.
‘Events’ include staging of sporting, cultural, scientific, technological, agricultural or entertainment
events and exhibitions.
‘Transport/vehicles’ includes trains, trams, buses, ferries, airplanes, ships, trucks, cars and other motor
Example 2 – Cleaners
John and Betty Cleaning Services has an ABN and contracts to clean office buildings and schools in their local area. From time to time, they engage contractors to help them out. As a provider of
cleaning services, John and Betty Cleaning Services will need to prepare and lodge a taxable
payments annual report detailing payments they make to contractors that undertake cleaning
activities for them.
Payments you need to report
If your business provides cleaning services, you only need to report payments you make to contractors for cleaning activities. Similarly, if your business provides courier services, you only need to report payments you make to contractors for courier activities.
If an invoice you receive from a contractor includes both labour and materials, whether itemised or
combined, you are required to report the total amount of the payment.
Example 3 – Reporting of mixed invoices
Highlight Management Pty Ltd (Highlight Management), a cleaning business, engaged a contractor
to clean a school. As part of the contract the contractor is required to provide their own cleaning
products for which they charge Highlight Management. At the end of the month the contractor
provides Highlight Management with an invoice of $3,300 (including GST) for their cleaning services and cleaning products purchased. The total amount of the invoice of $3,300 is required to be reported.
Details you need to report
The details you need to report for each contractor include:
– ABN (where known)
– gross amount you paid for the financial year (this is the total amount paid including GST)
– total GST included in the gross amount you paid.
You may be asked to include additional information where it is known to you. This additional information includes the contractor’s phone number, email address and bank account details (where they are paid by electronic bank transfer).
You are required to report the total payments you make to contractors in the financial year in which the payments are actually made (cash basis).
The details you need to report are generally contained in the invoices you receive from the contractors you engage.
Payments you don’t need to report
There are specific payments you don’t report on the Taxable payments annual report:
- There are specific payments you don’t report on the Taxable payments annual report:
- Payments for materials only.
- Unpaid invoices as at 30 June each year.
- Pay as you go (PAYG) withholding payments, such as those you make to employees or under a voluntary agreement to withhold, as these amounts are reported in your PAYG withholding payment summary annual report. If amounts are withheld because a contractor did not quote an ABN, you can choose to include these payments in the PAYG withholding where ABN not quoted – annual report or the Taxable payments annual report. Do not include these payments in both reports.
- Payments within consolidated groups. If you’re in a consolidated, or multiple entry consolidated group for income tax purposes, you don’t need to report payments you make to another member of that same group.
- Payments made by individuals for private or domestic reasons.
Example 4 – Food delivery company using both employees and contractors
Immediate Food Pty Ltd is a company with an ABN that picks up and delivers food from restaurants to customers. Customer A orders curries from an Indian restaurant, while Customer B orders paellas from a Spanish restaurant. Immediate Food has staff employed on an ongoing basis to conduct deliveries and occasionally hires contractors during peak seasons. Immediate Food gets one of its employees, Bob, to deliver the curries to Customer A, and one of its contractors, James, to deliver the paellas to Customer B. Immediate Food is a supplier of courier services as it has been engaged to deliver food for the Indian and Spanish restaurants’ customers. Immediate Food is required to report the payment made to James in its Taxable payments annual report. The payment Immediate Food makes to Bob is for wages and is reported in its PAYG withholding payment summary annual report.
Please contact us should you have any questions.
This article appeared in our June 2018 newsletter. Author: Patricia Glenn