In the 2011/12 Federal Budget, the Government announced that new reporting requirements would be introduced for the building and construction industry. The new requirements aim to address the significant levels of non-compliance by contractors within this industry, as identified by the Australian Taxation Office (ATO).
On 21 March 2012, regulations were introduced which give effect to these new provisions which will apply from 1 July 2012. The regulations require details of certain supplies to be reported to the ATO. Importantly, it will be the purchaser of the supply who is required to report the information, not the supplier.
Who needs to report?
A purchaser will be required to report supplies of building and construction services to the Commissioner of Taxation if:
- The purchaser is carrying on a business primarily in the building and construction industry
- The purchaser has an Australian Business Number (ABN)
The purchaser receives:
Building and construction services; or
A supply of both goods and building and construction services, if the services are not merely incidental to the supply of goods.
There are a broad range of activities that are considered to be in the nature of “building and construction”. These include activities from initial design and preparation, through to the construction and maintenance of any part of a building, structure, works, surface or sub-surface.
Entities on the fringe of this industry should review which activities are considered to be in the nature of “building and construction” as the provisions are far reaching.
Definition of Primarily in the construction industry
For the reporting provisions to apply, the purchaser must be carrying on a business that is primarily in the building and construction industry. This will be the case where:
In the current financial year, 50% or more of the purchaser’s business activity relates to building and construction services
In the current financial year, 50% or more of the purchaser’s business income is derived from providing building and construction services; or
In the last financial year, 50% or more of the purchaser’s business income was derived from providing building and construction services.
Take action now!
While the first report does not need to be lodged until July 2013, steps should be taken now to ensure that the required information can be effectively captured for the whole financial year.
Entities that will be subjected to the new reporting rules should be identified as soon as possible (prior to the end of the current financial year). It will then be necessary for those entities to put in place systems to identify suppliers of building and construction services and record the required information from 1 July 2012.