The government will extend the taxable payments reporting system to contractors in the courier and cleaning industries, with effect from 1 July 2018.

These changes were recommended in the Black Economy Taskforce that was released on Budget night. The expansion of this reporting system follows its successful implementation in the building and construction industry.

From 1 July 2018, all entities predominately in the courier or cleaning industry will need to report the following to the Australian Taxation Office. A list of each contractor and their ABN, name, address, the gross amount paid to them in the financial year (including GST), and the total GST included (if any) in the gross amount paid.

It is noted in the explanatory memorandum to the legislation that the terms “courier” and “cleaning” are not defined, and are intended to take their ordinary meaning. However, the ATO has mentioned that the following services are not considered to be courier services for the purposes of this system:

• passenger transport services, ie buses and taxis
• transporting of blood, blood products, organs or tissue, or
• freight transport.

Also, entities in these industries are reminded that the following payments are not required to be reported on:

• Payments for materials only
• Unpaid invoices as at 30 June each year (for an annual report)
• PAYG withholding payments, as these are already reported elsewhere, and
• Payments within consolidated groups.

Risk mitigation steps

This amount of reporting brings payments to contractors into line with the reporting of salary and wages paid to employees in these industries.

An intention of this type of policy is to ensure the industry at large is doing the right thing and paying workers appropriately. Whether an individual providing services on behalf of a principal as an employee or a contractor is a question of fact based on substance over form.

While there are legislative tests that require the application to determine this issue, they mostly seek to capture the essence of the common law that has developed over time in relation to this issue.

Implementation process

The legislation states that the payments are required to be reported every quarter, however, it is expected that the Commissioner of Taxation will allow an annual report to be lodged by the businesses in these industries, consistent with the requirements for the building and construction industry.

It is important to note that there will be no need to report payments made for private and domestic purposes. This expansion of the taxable payments reporting system will be applicable to businesses whose primary industry is in the courier and cleaning industries. The policy intention is to improve compliance of both the businesses and the contractors in these industries.

If you require any advice from one of our advisers, please contact our office.