Geoffrey Yiu discusses the latest measures proposed by the Government to expand TPRS and remove tax deductibility of certain payments.
The Government’s response to the report of the Black Economy Taskforce has generated considerable work for Treasury over recent months. Earlier this week, Treasury released draft legislation which would expand the taxable payment reporting system (TPRS) to the road freight, information technology and security industries from the 2019-20 financial year. This would add to the TPRS’s current application to the building and construction industries, and the Bill currently before Parliament which would apply TPRS to courier and cleaning services from the 2018-19 financial year.
TPRS requires businesses to report to the Australian Taxation Office (ATO) on all payments made to sub-contractors for certain types of services during the preceding financial year. The reporting deadline is within two months of the end of the financial year, and so businesses in the courier and cleaning industries should already be considering whether their systems are adequately set up to report on their current sub-contractor payments.
Also this week, Treasury released draft legislation which would deny an employer an income tax deduction in respect of salary and wages, where it has either failed to withhold Pay As You Go (PAYG) income tax, or not reported the wages through either the single touch payroll system or predecessor system. The measures include a protection for employers who treated a worker in good faith as an independent contractor, and obtained an ABN from the worker, where it is subsequently determined that the worker was a common law employee. This legislation would put PAYG on a similar footing to superannuation contributions, in terms of the consequences of not paying it at the correct time.
When assessing systems for compliance with TPRS and PAYG withholding requirements, employers also have the opportunity to check that there are no other exposures in relation to payroll tax and workers’ compensation insurance.