ATO crackdown on TPAR lodgements

The ATO has reminded relevant taxpayers to lodge their Taxable Payments Annual Report (TPAR) by the annual deadline or as soon as possible. It notes that the deadline for each year is firm and those that fail to lodge their TPAR may be subject to penalties, the scale of which depends on the size of the entity and the period of time since the due date for lodgment. As a reminder, the TPAR applies to businesses in the building and construction industry as well as businesses that provide cleaning, courier and road freight, information technology and security, investigation or surveillance services and have paid contractors in relation to those services.

For small entities, the failure to lodge (FTL) penalty is calculated at a rate of one penalty unit for each period of 28 days (or part thereof) that the return or statement is overdue, up to a maximum of 5 penalty units. From 1 July 2023, one penalty unit is $313, therefore the maximum that small entities could be liable to would be $1,565. For medium entities (ie medium withholder for PAYG withholding purposes or has assessable income or current GST turnover of more than $1m and less than $20m) the penalty unit is multiplied by 2, which means the maximum FTL penalty could be $3,130. Similarly, for large entities (ie large withholder for PAYG withholding purposes or an entity with an assessable income or current GST turnover of $20m or more) the penalty unit is multiplied by 5, therefore the maximum penalty could be $7,825. In addition, for global significant entities, the base penalty unit is multiplied by 500, meaning that the maximum penalty applicable could be $782,500. “The ATO recently issued more than 16,000 penalties for businesses who didn’t lodge their TPARs for previous years, despite receiving multiple reminders.

The average penalty for not lodging was approximately $1,110.” – ATO Assistant Commissioner, Tony Goding Businesses that may have received a reminder from the ATO to lodge a TPAR but do not actually need to lodge will need to submit a TPAR Non-lodgment advice form to avoid an unnecessary follow up. The form will allow entities to notify ATO of multiple years on the same form as well as to advise that they do not need to lodge in the future. According to the ATO, around $400bn in payments made to almost 1.1m contractors were reported in the TPAR system in the last financial year. The ATO uses the information obtained to check for red flags, including non-reporting of income, non-lodgment of tax returns or activity statements, overclaiming of GST credits or misusing of ABNs.

The ATO cites a recent example where it used TPAR data to investigate a sole trader who failed to include more than $80,000 of income from 3 different companies and failed to lodge activity statements. The ATO will also include information reported in the TPAR in their prefilling service to help contractors get their income right in their tax returns. The prefilled data will give taxpayers transparency about the data that has been provided to the ATO about their business transactions.

Speak to one of our accountants if you have any questions about the changes in tax for 2023.