ATO finds 2 billion "black" tradie dollars

In an effort to stem the “black economy” operating in the building industry, the Australian Tax Office (ATO) established a data matching regime, by which building and construction businesses must report all payments made to contractors in the industry.

Now the ATO has released a report showing that the new measures have recouped additional income tax and GST of $2.3 billion for the 2012–13 financial year.

This amount is comprised of:

- Lodgment of returns $265 million

- Goods and services tax $506 million

- Pay as you go withholding $1,128 million

- Pay as you go instalments $357 million

The figure of $2.3 billion reflects an increase in liabilities reported by businesses in the building and construction industry that:

- received taxable payments that were reported, and/or

- reported taxable payments to the Tax Office.

Although specific increases cannot be attributed solely to the impact of the taxable payments reporting system, the ATO believes it is likely that the majority of the increase flows from the introduction of the reporting system, the communications and education program together with acceptance of the system by reporting businesses.

They also identified a number of apparent compliance risks where additional liabilities could be secured through direct compliance activity:

As of May 2015, 76,000 contractors with reported payments still had not lodged a 2012–13 tax return and 21,000 had one or more 2012–13 activity statements unlodged, while 53,000 contractors have lodged 2012–13 tax returns but appear to have reported less income in their tax returns than they have been reported to have received.

Additionally 84,000 contractors without an active GST registration have been reported to have received payments that include GST totalling $426 million, and 53,000 transactions did not include an ABN or the quoted ABN was invalid. The value of these transactions is $1.3 billion and this amount is unlikely to have been included in contractor tax returns.

The ATO says that while building and construction industry businesses with reporting obligations have responded well to the system - with approximately 76 per cent of businesses that need to lodge have done so - they will continue to target the remaining 24 per cent. They have reported 1.58 million transactions valued at $163 billion. The availability to the ATO of this valuable information has driven significant improvements in compliance by contractors.

The ATO says this has had a positive impact on levelling the playing field across the building and construction industry, reducing unfair competition from businesses that do not pay their fair share of tax.