The ATO traced payments to contractors using data from its taxable payments reporting system (TPRS), following estimates that more than 60,000 Australian businesses had yet to lodge TPARs for the 2019–20 year.
Businesses providing services across the building and construction, cleaning, and courier industries are required to lodge a TPAR annually.
After the scheme was extended last year, businesses providing road freight services, information technology services, and security, investigation or surveillance services now have to lodge TPARs, too.
ATO Assistant Commissioner Peter Holt said the technology has granted the Tax Office a clearer view of payments made to contractors, and since its update in early March, more than 158,000 businesses expected to lodge TPARs for the 2019–20 year have now done so.
“More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year to us,” Mr Holt said. “This data, combined with our sophisticated data and analytics capability, means our field of vision to detect unreported income is better than ever.”
Armed with the TPRS, which Mr Holt in March expected to capture many taxpayers for the first time ever, the ATO has signalled it will now move to proactively contact contractors to ensure that income declared matches that provided to them by their employers.
“Where we discover a discrepancy, our first step is always to contact the taxpayer or their tax professional to check they have fully reported these payments in their tax return,” Mr Holt said.
Through extended lockdown periods and volatile business conditions, the ATO saw businesses contract out services at an increased rate. In August last year, Mr Holt said the resulting services would see businesses that may never have needed to lodge a TPAR, have to do so by 28 August last year.
The ATO noted that it is also using TPRS data to check that businesses are operating under active Australian business numbers and are registered for GST where appropriate.
Pointing to a $6.7 billion shadow economy fueled by tax evasion in Australia, Mr Holt said it isn’t fair to contractors who do the “right thing” in their industries when their colleagues deliberately under-declare their income.
“Honest courier drivers do the right thing: they pay their rego, pay their road tolls, stick to the speed limit, and pay their taxes,” he said. “It’s not fair that some dishonest drivers get to skip the ‘toll booth’ and get an advantage over their honest competitors.”
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John Buckley is a journalist at Accountants Daily.
Before joining the team in 2021, John worked at The Sydney Morning Herald. His reporting has featured in a range of outlets including The Washington Post, The Age, and The Saturday Paper.