Franchisees providing cleaning and courier services may be hit with financial penalties should they not conform to a new franchise tax update.

The Australian Taxation Office’s (ATO) recently introduced Taxable Payments Reporting System (TPRS) signals the government body’s renewed focus on stamping out non-compliance.

The new system strengthens the ATO’s detection of those gaining an unfair advantage by under-reporting their income.

Introduced in 2012 to the building and construction industry, the TPRS helped to protect $2.7bn from being lost to the black economy in 2015-16.

Who is affected by the franchise tax update?

The ATO’s latest announcement sees the system now apply to businesses providing cleaning or courier services that have an Australian Business Number (ABN) and make any payments to contractors for cleaning or courier services they provide on a business’s behalf.

ATO Deputy Commissioner, Deborah Jenkins revealed that the franchise tax update will apply even if cleaning or courier services are only part of a franchise business’ activities.

Franchisees that provide a range of services may need to lodge a TPAR if payments they received for cleaning or courier services make up 10 per cent or more of their total GST turnover.

“If you engage contractors to provide cleaning or courier services to your customers on your behalf, you may need to lodge a TPAR,” Jenkins said.

“Even if they are not registered for GST, they still need to check if they need to lodge a TPAR because all businesses have a GST turnover regardless of whether or not they are registered for GST.”

“It’s important for franchise businesses to look into it and find out more through ato.gov.au/TPAR or their registered tax professional.”

For required businesses, the first TPAR is due by 28 August 2019. Franchisees affected by the franchise tax update must report total payments, including cash payments they made to each contractor or subcontractor for cleaning or courier services in the 2018-19 financial year.

“Examples include paying a contractor to deliver flowers or goods, or contracting cleaning services as part of major events. There are other examples on the ATO website,” Jenkins said.

The ATO uses the TPAR information to identify businesses not conforming to regulatory standards.

How to lodge a TPAR

“Reporting online is a quick and secure way for businesses to meet their obligations,” Jenkins said.

“It has the advantage of ensuring businesses complete the report correctly, using inbuilt checks, and also provides instant online confirmation once the report is lodged.”

Franchisees unsure if they are required to complete a TPAR under the franchise tax update can visit the ATO website for more information.