As a business owner, you’ve probably heard of TPAR. But you may be unsure of what it is, whether or not you need to file, and how best to go about it if you do. Let’s take a look at TPAR, how to prepare a TPAR in Xero, and TPAR lodgement
What is TPAR?
The Taxable Payments Annual Report, or TPAR, provides the Australian Taxation Office (ATO) with information about payments that your business made to contractors throughout the year for their services. The ATO uses this information to ensure that contractors, subcontractors, and independent contractors meet their tax obligations
Certain types of businesses (as well as some government entities) are required to file a TPAR. You likely need to lodge one each year if your business provides any of the following -
- Building and construction services
- Cleaning services
- Courier services
- Road freight services
- IT services
- Security, investigation or surveillance services
If you fall into one of these categories, you can work out whether or not you are required to lodge a TPAR by visiting the ATO website
The report covers payments made in each full financial year ending 30 June. If you are expected to file a report, this must be done by 28 August annually. You may be subject to penalties if you fail to lodge your TPAR on time
Which payments do I need to report?
The payments that you must report on your TPAR will depend on the type of business you run. If your business provides building and construction services, you will report payments made to contractors for building and construction services. If your business provides cleaning services, you will report payments made to contractors for cleaning services. And so on
Generally speaking, you only need to include payments for labour (not materials) that have been made in the financial year ending 30 June. More information on which payments to include (and which to exclude) can be found here
For each payee, you will need to have these details on hand -
- Australian Business Number (ABN), if known
- Name (business or individual)
- Amount paid to them for the financial year. This will incorporate the following -
- The gross amount you paid them for the financial year (including any GST)
- The total GST you paid them
- The total local tax withheld
How do I lodge a TPAR?
Business owners can complete TPAR lodgement online, on paper, or by using business software. Xero makes filing your TPAR easy. Either use the information Xero provides to complete your TPAR manually or lodge your TPAR directly from Xero with the press of a button
Whichever method you choose, we recommend that you set up a contact group in Xero containing all the contractors that might need to be included in your annual TPAR. This will make it easy to identify them come reporting time. For each contractor you include, be sure to check that their ABN, name, and GST registration are correct. You can do this using ABN Lookup on the ABR website or the ATO app
The report that Xero prepares will contain bill and spend money payments (including overpayments and prepayments). It will exclude credit notes and payments made in other currencies or to contacts without an Australian address
How to prepare your TPAR in Xero
Xero’s TPAR function is found in the Reports section under Tax Reports. You will begin by setting up rules for creating the report. This might entail selecting payments made to all contacts from specific accounts, or selecting payments made to the contacts group you created specifically for this purpose. Multiple rules can be added if necessary
Check the resulting list to see that contractors’ contact details and included payments are correct. If you need to make any changes, simply click the contact’s name to view and update details, or to exclude an individual payment from the report. Any changes you make to the Contact Details fields are saved to the contact’s record in Xero
To lodge the report with the ATO directly from Xero, click the Lodge to ATO button. You will have an opportunity to confirm and update your details before authorizing the TPAR filing. After the report has been sent, you will receive an email confirming the success or failure of the lodgement
If you need help setting Xero up properly or lodging your TPAR, get in touch with us today!