The ATO has singled out IT contractors as part of its crackdown on Australia’s $50 billion black economy.
Businesses in the IT industry that engage contractors will now have to report payments made to contractors to the ATO.
In its recent Final Report, released as part of the 2018-19 Federal Budget, the government’s Black Economy Taskforce found that Australian businesses are being underbid by those who don’t comply with taxation law.
In response to the Taskforce, the government has released exposure draft legislation for public consultation which extends the taxable payment reporting system (TPRS) to industries that have been deemed “high risk”, which includes information technology.
In the Exposure Draft Explanatory Materials, the ATO lists the IT contracting services that can expect stricter regulation:
- technical support
- computer facilities management
- internet and web design consulting
- computer hardware consulting
- software development
- computer network systems design and integration
- software installation
- computer programming
- software simulation and testing
- computer software consulting, and
- systems analysis
The new measures do not cover the purchase or lease of hardware and software, nor do they cover the use of software to provide a service other than IT, such as accounting or word processing.
“Honest businesses meeting their tax and other obligations lose out to competitors doing the wrong thing and this encourages others to begin operating in the black economy in order to remain competitive,” said Minister for Revenue and Financial Services, Kelly O’Dwyer.
“These measures are an important step to improve compliance with tax obligations and deter businesses from engaging in the black economy.”
The TPRS is labelled by the ATO as a “transparency measure” and was first applied to the building and construction industry in the 2012-13 tax year.
Within the first year the ATO received additional income tax and GST liabilities of $2.3 billion from businesses reporting payments made to contractors.
Following the building and construction industry, the TPRS has been extended to the courier, cleaning, road freight, security and now information technology industries.
Stakeholders are invited to comment on the draft legislation. Submissions close on 17 August.