Geoffrey Yiu explains how new legislation aimed at targeting the Black Economy will affect businesses involved in cleaning and courier services.
The federal government’s introduction of the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018 represents the next phase of its effort to improve tax compliance across some perceived higher risk sectors of the economy.
If passed, the Bill will require businesses which provide cleaning or courier services to make an annual report to the Australian Taxation Office (ATO) of all the consideration they provide to other entities (such as subcontractors and non-employee workers) for carrying out those services. This represents an extension of the Taxable Payments Reporting System (TPRS) that currently applies to the building and construction industry, and government related entities.
The Bill does not define cleaning or courier services, with the intention that they will take on their ordinary meaning. The Explanatory Memorandum (EM) to the Bill states that “cleaning service” is intended to include any service for the removal of dirt or similar material from a structure, vehicle, surface or piece of equipment. The EM also describes a “courier service” as including the collection and delivery of parcels, letters, food or any other goods, by any means including car, truck, bicycle or on foot.
Many subcontractors are already “in the system” as far as taxation is concerned, in that they have an Australian Business Number (ABN). However obtaining the additional “cross-reference” data from head contractors will enable the ATO to more readily identify the businesses that appear to warrant additional compliance activity. The EM notes that the measure is expected to result in a gain in tax receipts of $132M over the forward estimates period, including goods and services tax (GST) of $56M.
The reporting requirements will first apply to payments to subcontractors made on or after 1 July 2018. The report to the ATO is not due until after the end of the 2019 fiscal year (although there is scope for regulations to specify a different reporting cycle in future). Therefore, best practice for businesses in the courier and cleaning industries will be to implement a solution for tracking payments to relevant subcontractors through the course of the year. The required information is likely to include the name, business address and ABN of the subcontractor, and the aggregate consideration paid for the services (including identification of the amount of GST specified on the invoices).
KPMG can assist with analysing your data to identify the necessary information to report, and at the same time identify risks and opportunities such as in relation the contractor-employee distinction, payroll tax, and superannuation. We can also assist by automating the data analysis and annual reporting to the ATO.
The Bill also contains provisions which, if passed, would introduce criminal penalties for the manufacture, supply, use or possession of so-called sales suppression tools, which distort or falsify the records derived from point-of-sale systems.
As the federal government further considers the recommendations of the Black Economy Taskforce, we can expect to see the announcement of further related measures in the coming months.