Through data matching, the ATO is seeing some contractors incorrectly reporting or omitting contractor income. Contractors need to report all their income in their tax return, including payments made by businesses for their contracting work.
Note that, as part of the taxable payments reporting system (‘TPRS’), certain businesses must lodge a ‘Taxable payments annual report’ (‘TPAR’) to report payments made to contractors for providing the following services:
- building and construction;
- courier;
- cleaning;
- information technology;
- road freight; and
- security, investigation or surveillance.
For taxpayers who work as a contractor and provide any of these services, the business they contract to should be reporting those payments to the ATO on their TPAR. Contractors obviously then need to include this income on their tax return.
If the ATO suspects a contractor may have omitted TPRS income on their tax return, it may contact them to request they amend their tax return. If the contractor does not take action, the ATO may conduct a review and audit of their business, and penalties and interest may apply.