The recent Federal budget included a proposed reporting system that the government will introduce, firstly to the building industry and associated businesses, but there are some industry experts that suspect it will be implemented to all businesses over time.
In summary the proposal requires businesses to report to the Australian tax office the amounts paid to all contractors they engage and the contractors ABN’s. It has been reported that contract laws will also be required to report, with their own ABN, receipts from clients and the clients ABN. Not only will this add to the cost of reporting and the paperwork required by contractors and their clients, but this will also enable the Australian tax office to quickly identify labour only contractors. This will enable scrutiny in a crackdown on non-compliant contractors and the companies engaging them.
Reportedly the ATO’s matching of contractor’s payments will be a simple process in which net GST returns from the ABN’s holders businesses are checked, if the net GST returns from the business (that is the ABN holder) is within the normal range for the industry then there is no reason for concern. However if the GST return is well outside the usual range, then there is a reason for the ATO to investigate and probably result in an audit.
The bottom line will be to make sure that all your contracting arrangements are compliant and correct before this budget is passed to avoid the ATO running the rule over your business and potentially requiring financial adjustments in PAYG, superannuation and other statuary costs as a consequence.
There are methods and frameworks available that ensure compliant engagement (utilised by the ATO) and typically result in actual savings.
Brett Griffith is an authorised representative of the Workforce Advisors Group and can be contacted on 0439 010 737 . or brett@workforceadvisorsgroup.