https://cfosvirtual.com/ What if you could have all the skills of a leading Chief Financial Officer without having to pay the huge salary? Outsourcing a CFO for specific tasks and purposes can give your business the boost it needs to explore new horizons throughout Australia and Asia. This is particularly use as the cleaning, courier, and trolley-collection industries are adjusting to a new reporting regime for subcontraction.

1. Do you hire subcontractors? Welcome to a new reporting regime
The ATO’s new rules for cleaners, trolley collectors and couriers.
Subcontracting is the heart and soul of many industries. Rather than going to the effort and
paperwork of hiring your own staff, contracting labour provides a degree of efficiency.
Jero recently started his own courier business. He makes sure law firms and medical
businesses receive their important documents and items on time. While he has a head
office and a few key administrative staff, the actual work of transporting these items
is performed by a network of contracted couriers. This allows him to provide his
services across both Melbourne and Sydney.
You don’t need to manage the detail of every aspect of your service provision. You entrust
your subcontractors with this. And therein lies the key concept. Trust. As anyone who has
hired contractors previously knows well, the inability for your contractors to perform at
expected standards, in any area of their operations, ultimately comes back to bite your
business.
Jero has a strict induction process when he contracts couriers. He makes sure they
understand the processes and requirements of his business, from human resources and
payroll to safety and risk management. In particular, he explains the specifics of
courier work within the legal and medical industries. However, there is a limit to how
closely he can monitor and manage the network of couriers he contracts over two
cities.
These standards need to be upheld by you. But what happens when the ATO shifts the tax
regime, and so changes the standards for how you must pay your subcontractors?
This has just happened for the cleaning, trolley-collection, and courier industries. And this
means anyone who works in these industries must take notice, especially since certain payroll
concerns can increase the risk of an ATO tax audit.
What’s changed?
From 1 July 2018, the Taxable Payment Reporting System (TPRS) now applies not only to
the building industry. Cleaning, trolley-collection and courier businesses will also need to
report payments they make to contractors (individual and total for the year) to the ATO in the
form of an annual report. This extends the enhanced reporting requirement imposed on the
building industry in 2013-14 to other industries that also commonly use subcontraction.
And if you hire any of these subcontractors, then you and your tax accountants need to ensure
that you keep to the new reporting regime to a tee.

2. Jero has maintained consistent methods for his payroll and rostering. His contractors
must use both paperwork and software to register hours and invoices. Some of the
couriers he hires manage very small operations. He does not report every detail to the
ATO, just the minimum of what he knows is required. He is unsure if his
subcontractors know about the new reporting requirements. In fact, he is unsure how
to explain it to them, and how much he is responsible for reporting payments made to
them
The first annual report for affected cleaning and courier companies is due in August 2019.
You must include info such as the ABN, Name, Address, Total Annual Amount Paid
(Including GST), and Total GST included in the gross.
It’s unlikely that this reporting regime will not extend to other industries. The government’s
Black Economy Taskforce has encouraged the further expansion of the system to include
labour hire, owner-builders, the home improvement sector, and IT contractors.
How could these changes impact my business?
Jero is not sure what to do next. He has clear financial records. But he also manages
more than seventy subcontractors. All them provide invoices for the delivery of
medical and legal items, but these invoices come in different shapes and forms. He
realises he needs to go back to his payment system and account for the details and
payments for each of his contractors, and files the report. August is not that far away.
Does he have time, and how will he know he is doing it correctly?
The ATO is keen to clean up the ‘black cash’ economy. They are pushing for greater
transparency. They want to make sure all payroll tax payments are recouped. This is why
they have put these new rules into place.
Subcontractors are running their own businesses. They are liable for how they pay tax to the
ATO; you are not responsible to the ATO if your incorporate subcontractors fail to comply.
But if you are working with subcontractors who are not keeping proper payroll or invoice
paperwork, then you are will have significant issues with state payroll tax offices and Fair
Work. These organisations will look to penalise or tax all parties involved in improper labour
practices. Therefore, you need to make sure that you understand the reporting requirements.
And make sure that you work with subcontractors who follow them.
And even if you are not a courier like Jero or a cleaner, you can expect to see stricter
reporting measures impact your industry in due course.

3. Of course, this is all the more significant if you operate as a subcontractor in these industries.
Are you able to put aside the time required to both understand the new reporting requirements
and ensure you report dutifully?
Getting on top of the new regime
The difficulty here lies in getting an accurate and comprehensive report done in time. It’s not
simply the matter of reporting by August. It’s a matter of adjusting your payroll and
subcontracting processes in order to meet reporting requirements regularly.
Jero now has a better understanding of what reporting is now required of him. But, in
so doing, he now realises he has quite a big task ahead of him. He not only needs to
go over his payroll and payments for the current financial year. He needs to get in
touch with nearly all his 70 contracted couriers and verify the accuracy of their
business details and invoicing systems. More than that, if any do not meet the new
reporting standards, he needs to adjust his own processes so that he ensures he gets
comprehensive invoice, GST, and payment info, year in and year out.
This is where the value of a Virtual CFO becomes evident. CFOs are not only able to ensure
businesses meet tax requirements. They assess, update, and analyse the comprehensive
operations of a business.
Jero is busy. Like most small business owners, he is consumed by the business of
doing business. He realises he doesn’t have the time or acumen to properly adjust his
rather ad-hoc system. Likewise, he doesn’t want to get it wrong and invoke a potential
tax audit. So he uses contraction to fix his contraction issue. He outsources the
analysis and restructure of his payroll and payment system to a Virtual CFO in
Sydney. He realises the targeted investment saves him time and money in the long
run.
It might seem like simply a matter of keeping on top of your invoices. In a way, this is true.
You will be able to best adjust to the Taxable Payment Reporting System (TPRS) if you keep
detailed track of the business details, payments, and invoices of your subcontractors and all
of their staff.
But this can be a complex matter, especially in the cleaning, trolley-collection, and courier
industries. The reason why these types of business are being targeted is because they account
for a large percentage of non-compliance in the ‘black economy’. Having the right tax
accountant or Virtual CFO in Sydney on your side to carefully help you set up ongoing and
sustainable reporting procedures is a long-term investment that can save you time and money
– and potentially keep the tax office from knocking on your door.

4. Important Disclaimer: Readers should not act solely on the basis of the material on this
page. Items herein are general comments only and do not constitute or convey advice.
Legislation and proposals of legislation are also subject to constant change. We therefore
recommend that formal advice be sought before acting in any of the areas. This news article
is issued as a guide to the readers. This article first appeared at:
https://cfosvirtual.com/latest-news/ATO-new-reporting-for-subcontractors.html