Contractors Omitting Income

Through data matching, the ATO is seeing some contractors incorrectly reporting or omitting contractor income. They need to report all their income, including payments made by businesses for their contracting work. Note that, as part of the taxable payments reporting system (‘TPRS’), certain businesses must lodge a ‘Taxable payments annual report’ (‘TPAR’) to report payments made to contractors for providing the following services:

• building and construction;
• courier;
• cleaning;
• information technology;
• road freight;
• security, investigation or surveillance.

For taxpayers who work as a contractor and provide any of these services, the business they contract to should be reporting those payments to the ATO on their TPAR, and those contractors will obviously need to include this income on their tax return. If the ATO suspects a contractor may have omitted TPRS income on their tax return, it may contact them or their tax professional to better understand their circumstances and potentially request they amend their tax return. If the contractor does not take action, the ATO may conduct a review and audit of their business, and penalties and interest may apply. Taxpayers can refer to ‘Taxable payments reporting and contractors’ (QC 68082) on the ATO’s website for further information in this regard. Contractors providing TPRS services should include all their income on their tax return, and the ATO includes information reported to it about contractor payments in its:

• pre-filling service — these payments may be easily included in their tax return if the

contractor is a sole trader; and

• reported transactions service in ATO online’ platform (for more on this, refer to QC

67393) — these records give contractors transparency about the data that has been provided to the ATO regarding their business transactions.