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ATO reminds contractors to declare $172bn in income

  • April 01 2021
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ATO reminds contractors to declare $172bn in income

By Cameron Micallef
April 01 2021

The Australian Taxation Office is using new data amid concerns that over $172 billion in contractor tax income is not being declared properly.

ATO

ATO reminds contractors to declare $172bn in income

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  • April 01 2021
  • Share

The Australian Taxation Office is using new data amid concerns that over $172 billion in contractor tax income is not being declared properly.

ATO

Under the changes, businesses that pay contractors in the courier, cleaning, building and construction, road freight, information technology, security, investigation or surveillance services industries are required to tell the ATO of payments made to contractors.

ATO Assistant Commissioner Peter Holt warned that the Tax Office is using data from its Taxable Payment Reporting System (TPRS) to create a clearer view than ever before of payments made to contractors in these industries. 

“More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year to us. This data, combined with our sophisticated data and analytics capability, means our field of vision to detect unreported income is better than ever,” Mr Holt said. 

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The ATO is using the data to proactively contact contractors to make sure they haven’t forgotten to declare the income reported through the TPRS.

“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.

Deliberately not reporting or under-reporting business income to the ATO contributes to the shadow economy. 

The ATO estimates that small businesses operating in the shadow economy costs the community more than $6.7 billion in unpaid tax every year.

“Honest courier drivers do the right thing: they pay their rego, pay their road tolls, stick to the speed limit, and pay their taxes. It’s not fair that some dishonest drivers get to skip the ‘toll booth’ and get an advantage over their honest competitors,” Mr Holt said. 

In the case study the ATO gave to taxpayers, ‘John’ a delivery truck driver earns $80,000 salary for his Monday to Friday job, while making $40,000 a year from his weekend contract.  

However, the driver only reported the salary in his tax return, excluding the $40,000 in contractor payments.

“A few months later, the ATO received a Taxable Payment Annual Report from the courier company that contracted John, reporting the $40,000 in income. We cross-matched the TPRS data with John’s tax return and noticed there was no business income declared,” the ATO said.

“We then sent John a letter asking him about the discrepancy and reminding him that he will need to declare the income. John lodged an amendment and paid the difference in tax owed.”

ATO reminds contractors to declare $172bn in income
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image
Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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