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Contractors omitting income

Our focus on contractors incorrectly reporting or omitting contractor income.

Published 21 February 2025

Our focus

As part of the taxable payments reporting system (TPRS), businesses must lodge a Taxable payments annual report (TPAR) to report payments made to contractors for providing the following services.

If you work as a contractor and provide any of these services, the business you contract to will report those payments to us on their TPAR. You need to include this income on your tax return.

Through data matching, we are seeing some contractors incorrectly reporting or omitting contractor income. You need to report all your income, including payments made by businesses for your contracting work. If we suspect you may have omitted TPRS income on your tax return, we may:

  • contact you or your tax professional via email to request you amend your tax return
  • contact you or your tax professional via phone call to better understand your circumstances and potentially request you amend your tax return.

If you don’t take action, we may conduct a review and audit of your business. Penalties and interest may apply.

For more information, see Taxable payments reporting and contractors

How to get it right

If you are a contractor providing TPRS services, remember to include all your income on your tax return. To help you get it right, we include information reported to us about contractor payments to you, in our:

  • pre-filling service – easily include these payments in your tax return if you are a sole trader
  • Reported transactions service in ATO online platform – these records give you transparency about the data that has been provided to us about your business transactions.

Example: Mike the carpenter

Mike is a carpenter who operates his business as a sole trader. Mike sub-contracts to multiple builders and completes his tax return himself.

As he provides building and construction services, the builders must report the payments they made to him during the 2024 income year. They must do this by lodging a Taxable Payment Annual Report (TPAR) with the ATO by 28 August 2024.

Mike does not use the pre-filled TPAR amounts for his tax return. This results in Mike not including all his contractor payments in his reported income. On review, the error was identified, and his 2024 assessment was amended to include the missing income. Mike was required to repay the tax shortfall and may be subject to penalties and interest.

Next year when Mike is completing his tax return, he can review and accept the pre-filled TPAR amounts. These will auto fill into his tax return, making it easy to ensure he has included all his contractor payments in his income.

End of example

Keep up to date

We want to make sure you're aware that:

  • your tax obligations and allowable deductions may change if the personal services income rules apply to your income
  • keeping accurate and complete records will help you meet your tax, super and employer obligations, and help you stay on track.

Learn more by taking our free self-paced online courses at:

You can also:

  • Subscribe to our free Small business newsletter to get updates that might impact your business.
  • Contact your tax professional to obtain advice specific to your business needs.

 

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