Just before Christmas, Treasury issued draft Regulations proposing a new taxation regime for contractors to the building and construction industry, Minter Ellison reports.

“The draft Regulations are applicable for the purposes of Division 405 of the Taxation Administration Act 1953 (Cth) and will require those businesses to report to the Australian Taxation Office payments made to contractors that provide building and construction services,” say report authors, Joanne Dunne and Phillip Greenham.

“The draft Regulations follow a Consultation Paper issued in May 2011 to the industry and the Australian Taxation Office's Compliance Program 2011-12, which identified industry-wide non-compliance with taxation obligations by contractors in the building and construction industry.

“The ATO's Compliance Program also identified a more generalised concern about whether workers called ‘contractors’ are actually contractors at law.

“It seems likely that information collected under the draft Regulations and Division 405 will be used by the ATO to consider both of these issues.

“For example, if a contractor derived 80% - 100% of its income from one business in the industry, the legal nature of that relationship may come under scrutiny. While this will obviously impact contractors, it could also impact the businesses themselves in terms of potential PAYG obligations, workcover, and payroll tax, for example.”

The draft regulation are proposed to take effect from 1 July. For details, see Minter Ellison’s full report at http://www.minterellison.com/Pub/NA/20120110_taxCompliance/?utm_source=alert&utm_medium=email&utm_campaign=20120110_taxcompliance.

Updated 17 Jan 2012