This tax time, the ATO is cracking down on taxpayers not lodging their taxable payments annual report (TPAR) on time. It has recently issued more than 16,000 penalties for businesses who failed to lodge their TPARs for previous years despite receiving multiple reminders. The average penalty for non-lodgment was approximately $1,110. TPAR information is used to check for red flags, including not reporting income, not lodging tax returns or activity statements, overclaiming GST credits or misusing ABNs for contractors and sole traders.
The ATO has reminded relevant taxpayers that the deadline to lodge their TPAR was 28 August 2023; businesses that have not yet lodged should do so as soon as possible, or contact the ATO about the reasons for their inability to lodge in time. The ATO notes that the deadline for each year is firm, and those who fail to lodge their TPAR may be subject to penalties, the scale of which depends on the size of the entity and the period of time since the due date for lodgment.
As a reminder, the TPAR applies to businesses in the building and construction industry as well as businesses that provide cleaning, courier and road freight, information technology and security, investigation or surveillance services and have paid contractors in relation to those services.
For small entities, the failure to lodge (FTL) penalty is calculated at a rate of one penalty unit for each period of 28 days (or part thereof) that the return or statement is overdue, up to a maximum of five penalty units. From 1 July 2023, one penalty unit is $313, so the maximum penalty that small entities could be liable for would be $1,565. For medium entities (medium withholders for PAYG withholding purposes, or those with assessable income or current GST turnover of more than $1 million and less than $20 million) the penalty unit is multiplied by two, which means the maximum FTL penalty could be $3,130.
Similarly, for large entities (large withholders for PAYG withholding purposes, or those with an assessable income or current GST turnover of $20 million or more) the penalty unit is multiplied by five, meaning a maximum penalty of $7,825. In addition, for significant global entities the base penalty unit is multiplied by 500, meaning that the maximum penalty applicable could be $782,500.
“The ATO recently issued more than 16,000 penalties for businesses who didn’t lodge their TPARs for previous years, despite receiving multiple reminders. The average penalty for not lodging was approximately $1,110”, ATO Assistant Commissioner Tony Goding has said.
Businesses that may have received a reminder from the ATO to lodge a TPAR but do not actually need to lodge still need to submit a TPAR non-lodgment advice form to avoid an unnecessary follow-up. The form allows entities to notify the ATO of multiple years on the same form, as well as to advise that they will not need to lodge in the future.
According to the ATO, around $400 billion in payments made to almost 1.1 million contractors were reported in the TPAR system in the last financial year. The ATO uses the information obtained to check for red flags, including non-reporting of income, non- lodgment of tax returns or activity statements, overclaiming of GST credits or misusing of ABNs. The ATO cites a recent example where it used TPAR data to investigate a sole trader who failed to include more than $80,000 of income from three different companies and failed to lodge activity statements.
The ATO will also include information reported in the TPAR in its pre-filling service to help contractors get their income right in their tax returns. The pre-filled data will give taxpayers transparency about the data that has been provided to the ATO about their business transactions.