Eric Abetz (Tasmania, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

asked the Minister representing the Assistant Treasurer, upon notice, on 9 September 2011:

With reference to an answer to a question without notice on taxation asked by Senator Payne in the Senate on 25 August 2011 and the Minister's reply that 'the ATO [Australian Taxation Office] had found a high level of noncompliance in relation to tax obligations by contractors in this industry':

(1) What evidence is there of noncompliance of contractors in the building industry.

(2) How many cases have there been over the past year of non-compliance.

(3) Was this proposal made to the Government by the ATO or by the Minister's office; if neither, which department put forward this policy.

(4) Was any analysis done on the additional level of red tape that these obligations will place on contractors; if so, what was the result of that analysis; if not, why not.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

The Assistant Treasurer has provided the following answer to the honourable senator's question:

(1) In order to better understand compliance risks, the ATO has collected information from businesses in the building and construction industry about payments they made to contractors for the 2008-09 and 2009-10 income years.

The ATO then matched the data to taxation information to identify the correct taxpayer and check their compliance with income tax obligations.

For the 2009-10 income year, the ATO found that only half of the individuals and just over three quarters of non-individuals, who could be identified, complied with their taxation obligations.

In addition, approximately 9% of the payment details collected were made to contractors who could not be matched to ATO records because they did not quote an Australian business number or did not quote their correct Australian business number. Whilst further work is required to correctly identify the recipients of these payments, it is unlikely that the income has been correctly reported.

The following tables provide income tax compliance data for the 2009-10 income year for contractors in the building and construction industry. These results are consistent with the findings for the 2008-09 income year.

Of the 11,384 contractors who were able to be identified, 5,353 or 47% were individuals and 6,031 were non-individuals (companies, partnerships and trusts). The following tables provide the compliance data for these contractors.

Table 1 Compliance by individual contractors

Table 2 – Compliance by non-individual contractors (companies, partnerships and trusts)

(2) The tables above provide information about contractors who received payments in the 2009 10 income year and have not complied with their obligations to lodge tax returns and correctly report their income.

In summary, of the 11,384 contractors identified, the following were determined to have not complied with their income tax obligations:

-   2,674 (50%) of individual contractors (Table 1)

-   1,334 (22%) of non-individual contractors (companies, partnerships and trusts) (Table 2).

(3) The proposal was developed jointly by the ATO and the Treasury. The formal proposal to the Government was put forward by the Treasury.

(4) A Regulation Impact Statement was developed by the Treasury to analyse the costs and benefits of the proposal, and was approved by the Office of Best Practice Regulation. This process included analysis of the compliance costs and burdens that would be placed on contractors and businesses paying those contractors. The analysis concluded that unless contractors further sub-contracted work, there would be no additional compliance burden for them. The compliance costs for businesses paying contractors were minimised by the fact that they would only be required to report information that currently they generally keep under existing record keeping requirements and practices. The full Regulation Impact Statement is available on the Office of Best Practice Regulation website.

Further consultation with industry has been undertaken to minimise the compliance burden on businesses paying contractors.