The Taxable Payments Annual Report (TPAR) is required by businesses in the construction and building industry as well as some governmental agencies. It outlines payments that you have made to external contractors.
There is no tax payable following the lodgement of the report. It is primarily used by the ATO for data matching purposes. It is also used as as a safeguard against the cash economy and GST fraud.
In the report you need to show the following:
- Name of contractor
- Contact details
- Total of payments made
- GST included in payments
- Tax withheld were no ABN is quoted
A common error many small businesses make is not withholding tax when a supplier fails to quote an ABN. If a supplier does not provide you with their ABN and the invoice is greater than $75, you are required to withhold tax at the highest marginal rate (45%).
However if the supplier is more of a ‘hobby’ than a business, they can avoid having to register an ABN by submitting a Statement by a Supplier form (commonly referred to as a ‘hobby form’) along with their invoice to you. If they provide this form you do not have to withhold the 45% tax.