A Taxable Payments Annual Report (TPAR) reports payments your business made to contractors during the financial year. It applies to businesses in building and construction, cleaning, courier and road freight, IT, and security, investigation or surveillance, plus some government entities. The 2026 TPAR is due by 28 August 2026. Late lodgement now attracts penalties, even when no tax is owed.
Many business owners still assume a TPAR is only for builders. That is no longer correct. The Taxable payments reporting system (TPRS) now covers five service categories, and the Australian Taxation Office (ATO) uses the data to cross-check what businesses pay contractors against what those contractors declare as income.
If your business pays contractors for relevant services, you may need to lodge a TPAR by 28 August each year. The report rarely creates a tax liability of its own, which is exactly why it is so easy to miss. From 22 March 2025, the ATO began applying failure to lodge penalties to overdue TPARs, so the cost of missing it has risen.
This guide explains who must lodge, what to report, what to leave out, and how to prepare before 30 June.
A Taxable Payments Annual Report is a yearly report to the ATO listing the payments a business made to contractors and subcontractors for certain services during the financial year. It covers building and construction, cleaning, courier and road freight, IT, and security, investigation or surveillance services. The report is due by 28 August.
The TPAR sits within the Taxable payments reporting system (TPRS), a third-party data-matching regime. Its purpose is straightforward: the ATO compares the contractor payments you report against the income those contractors declare in their own tax returns. Mismatches flag contractors who may have under-reported income.
The legal basis for the reporting obligation is the third-party reporting rules in Schedule 1, Division 396 of the Taxation Administration Act 1953. Because a TPAR is an information report rather than a tax return, lodging it usually does not change your tax position. It is a compliance obligation, not a payment obligation.
You may need to lodge a TPAR if your business has an ABN and pays contractors to deliver building and construction, cleaning, courier and road freight, IT, or security, investigation or surveillance services. The obligation applies to companies, trusts, partnerships and sole traders, whether or not you are registered for GST.
The reportable service categories under the TPRS are:
| Sector | When a TPAR is triggered |
|---|---|
| Building and construction | The business is primarily in building and construction and pays contractors for those services |
| Cleaning | The business provides cleaning services and pays contractors to deliver them |
| Courier and road freight | The business provides courier or road freight services and pays contractors to deliver them |
| Information technology (IT) | The business provides IT services and pays contractors to deliver them |
| Security, investigation or surveillance | The business provides these services and pays contractors to deliver them |
| Government entities | Certain payments to ABN holders, and grants paid to entities with an ABN |
A point that catches many mixed businesses: you can fall into the TPRS even if these services are only part of what you do. A café that pays a cleaning contractor is not caught, because it does not provide cleaning services to its customers. A property maintenance business that provides cleaning to clients and pays cleaning subcontractors generally is. For contractor reporting in the trades, our builders and tradies accountants work with these obligations year-round.
For building and construction, you must lodge if more than 50% of your business income is from building and construction services. For cleaning, courier, road freight, IT, and security or surveillance services, the test is lower: you must lodge if 10% or more of your business income for the year comes from those services and you paid contractors to deliver them.
The ATO applies a three-step calculation for mixed businesses outside building and construction:
If the result is 10% or more, you must lodge. Where you provide both courier and road freight services, you combine the income from both when applying the test.
Worked example. A Melbourne logistics business earns $800,000 in total income. Of that, $96,000 comes from courier and road freight work, and the rest from warehousing. Relevant-service income is 12% of total income ($96,000 ÷ $800,000), which is above the 10% threshold. If the business paid contractor drivers during the year, it must lodge a TPAR.
In our experience advising service businesses, the threshold test is the step owners most often get wrong, usually because they overlook that the calculation is based on income received for the service, not the number of contractors engaged. If your service mix sits near 10%, it is worth confirming the position each year with your business tax adviser.
A TPAR reports the total amounts you actually paid each contractor during the financial year for relevant services, including GST. You report per contractor, not per invoice. Reporting is generally on a cash-paid basis, so it captures payments made between 1 July and 30 June, not invoices that remain unpaid at year-end.
For each contractor, the report generally includes:
| Information required | Practical source |
|---|---|
| Contractor ABN (if known) | Supplier invoice or ABN Lookup |
| Contractor name | Supplier invoice |
| Contractor address | Supplier invoice |
| Gross amount paid for the year (including GST) | Supplier ledger or bills-paid report |
| GST included in the payments | Accounting software report |
| Tax withheld where no ABN was quoted | PAYG withholding records |
Accurate contractor records are what make a TPAR painless. If supplier cards are missing ABNs or addresses, the report becomes a last-minute scramble in August. Clean bookkeeping during the year, with contractor details captured at the point of entry, removes almost all of that friction.
You do not report employee wages, payments for materials only, unpaid invoices at 30 June, private or domestic payments unrelated to your business, or payments within the same consolidated group. Employee wages are captured through Single Touch Payroll, and incidental or materials-only costs fall outside the contractor-services focus of the TPAR.
Common exclusions:
| Do not report | Why |
|---|---|
| Employee wages and salaries | Reported through Single Touch Payroll and PAYG withholding |
| Invoices unpaid at 30 June | TPAR is generally based on payments actually made |
| Payments for materials only | The TPRS targets contractor services, not goods |
| Private or domestic payments | Not business contractor payments |
| Payments within a consolidated or MEC group | Treated differently for tax reporting |
The labour-and-materials trap. Where a single invoice covers both labour and materials and is not itemised, the ATO position is that you report the whole amount paid. You only strip out materials where the materials are billed separately or the labour component is incidental. A builder paying a subcontractor $40,000 for a job that includes both labour and supplies reports the full $40,000 unless the invoice clearly separates the two. This is one of the most common bookkeeping errors we correct.
The TPAR is due by 28 August each year for payments made in the financial year ending the previous 30 June. Late lodgement attracts a failure to lodge penalty, calculated at one penalty unit for each 28-day period (or part of one) that the report is overdue, up to five penalty units. One penalty unit is currently $330.
Source: ATO, Failure to lodge on time penalty; Penalty units (one unit = $330 from 7 November 2024).
For a small entity, the base penalty escalates as follows:
| Delay | Penalty units | Penalty |
|---|---|---|
| 1 to 28 days late | 1 | $330 |
| 29 to 56 days late | 2 | $660 |
| 57 to 84 days late | 3 | $990 |
| 85 to 112 days late | 4 | $1,320 |
| 113 days or more late | 5 | $1,650 |
For medium and large entities, and for significant global entities, the base penalty is multiplied (by 2, 5 and 500 respectively), so the exposure rises sharply with entity size.
Here is the point that surprises many owners. The ATO will usually not issue an FTL penalty for a late return that produces a nil result or a refund. That relief does not apply to TPAR, because it is a third-party data report. In other words, the ATO can penalise a late TPAR even though it creates no tax payable. If you engaged a registered tax or BAS agent and gave them everything they needed on time, safe harbour provisions may protect you from the penalty.
If your business does not need to lodge a TPAR but the ATO expects one, you can submit a TPAR non-lodgment advice to close off the obligation and avoid follow-up. Our team manages this as part of routine tax compliance.
If you are unsure whether your business needs to lodge, or whether your contractor records are TPAR-ready, we can review your position before the deadline.
Contact Us Today →Preparation before year-end turns a five-minute lodgement into a routine task. Confirm whether you provide a reportable service, test your income against the threshold, check that every contractor card carries a valid ABN, name and address, and reconcile contractor payments to your bills-paid report so the totals match what left your bank account.
A practical pre-30 June checklist:
Most accounting platforms, including Xero, can produce a draft TPAR directly once contractor payments are coded correctly. The quality of that draft depends entirely on the quality of the underlying data. If you would like the report produced and reviewed for you, our business accounting services include TPAR preparation and lodgement.
Related reading: our guide to key ATO due dates for 2026 sets the TPAR deadline alongside your BAS, PAYG, FBT and super obligations, and our explainer on the contractor versus employee distinction helps you classify your workers correctly before you report.
A TPAR is easy to overlook precisely because it does not generate a tax bill. But it gives the ATO direct visibility over contractor payments, it is increasingly enforced, and the penalties apply even when no tax is owed. Businesses in the five reportable industries, and mixed businesses near the thresholds, should confirm their position before 30 June and make sure their accounting system can produce an accurate report by 28 August.
If contractor payments are part of your business, we can confirm whether you need to lodge and make sure your records are ready well before 28 August.
Schedule a meeting →Disclaimer: The information provided in this article is general in nature and does not constitute specific tax, legal, or financial advice. We recommend seeking professional advice tailored to your individual circumstances. 42 Advisory is a CPA firm and Registered Tax Agent.
Yes, if a sole trader has an ABN, operates in a reportable industry (or meets the threshold for a mixed business), and pays contractors for relevant services. The obligation depends on the services provided and the payments made, not on the business structure.
The ATO can apply a failure to lodge penalty of one penalty unit ($330) for each 28-day period the report is overdue, up to five units ($1,650) for a small entity. Unlike most returns, the usual relief for nil or refund results does not apply, because a TPAR is a third-party data report.
Yes. You still report the payment, and you also report any amount you withheld under the no-ABN PAYG withholding rules. Where an ABN is not quoted, you are generally required to withhold at the top rate and remit it to the ATO.
Payments. A TPAR generally reports amounts actually paid to contractors during the financial year, on a cash basis. Invoices that are still unpaid at 30 June are not included until the year you pay them.
If the ATO expects a TPAR from your business but you are not required to lodge, you can submit a TPAR non-lodgment advice. This tells the ATO no report is due and helps avoid reminder notices or follow-up action.
Written by the 42 Advisory team. 42 Advisory is a Melbourne-based CPA firm and Registered Tax Agent (TPB RAN 26303651).