Managing subcontractor payments and TPAR compliance

Published 6 March 2026

Table of contents

• What is TPAR and who must lodge it?
• When you need to lodge a TPARxx
• What contractor payments are reportable
• Prepare and lodge your TPAR on time
• Simplify TPAR reporting with Xero
• FAQs on TPAR compliance

Key takeaways

• Taxable payments annual report (TPAR) compliance is required for certain industries that pay contractors or subcontractors, like construction, cleaning, courier, and IT services.
• The TPAR due date is 28 August each year. If you lodge late you could be penalised by the Australian Taxation Office (ATO).
• To stay compliant, report payments made to contractors each year in your TPAR report to the ATO.

What is TPAR and who must lodge it?

If your business pays contractors for services, you may need to lodge a TPAR each year. The TPAR tells the ATO how much you’ve paid to contractors over the financial year – and helps make sure those contractors are reporting their income correctly for tax purposes.

Businesses in the following industries may need to file TPARs:

• construction and building services from builders to electricians, plumbers, and painters
• cleaning services whether you’re providing commercial, residential or specialist cleaning
• courier and road freight services, including delivery drivers and logistics or trucking contractors
• security, investigation, and surveillance services from private security contractors to alarm system installers
• information technology services like software development, IT, and systems maintenance

You may also need to lodge a TPAR if you run a mixed-service business that provides any of these services as part of its operations.

When you need to lodge a TPAR

For most services, you’re required to lodge a TPAR if 10% or more of your total yearly business income comes from providing these services. For building and construction services, the threshold is 50% or more of business income.

Here are some examples to explain when and why a TPAR lodgement applies:

• Marco’s Building Co. runs small renovation projects across Sydney. Marco’s team handles most of the carpentry, but he often brings in licensed electricians and plumbers to finish each job. Because these contractors provide services directly related to his construction work, Marco needs to include their payments in his TPAR.
• Crystal Clean Solutions, a commercial cleaning company, often subcontracts its large office jobs to smaller cleaning crews when demand spikes. Since these payments are for cleaning services – a key industry under TPAR compliance rules – Crystal Clean must lodge a TPAR each year to meet its subcontractor reporting obligations.
• SwiftHaul Couriers is a regional delivery business that covers more ground by hiring freelance drivers to complete routes during peak periods. Even though those drivers aren’t employees, their payments count as reportable subcontractor payments under ATO TPAR requirements.
• BrightTech IT Consulting provides managed IT support to clients but sometimes engages independent developers for specialised software projects. Those payments are also reportable under TPAR reportingrules for the IT industry.

To double-check if the rules apply to you (or the people you employ), this ATO guide explains what TPAR is, explains whether your business needs to lodge one, and sets out the key steps for TPAR lodgement.

What contractor payments are reportable

Under TPAR compliance rules, you need to report most payments made to contractors or subcontractors for services. Here are the main points.

• If you’re paying someone to do something (not just supply something), it’s likely TPAR reportable.
• You’ll have to report payments even if you’ve included materials in their invoices. If a payment relates to both labour and materials, you must report the full amount.

For example, if you’re a builder who pays a subcontracted plumber $8,000 for work and materials combined, the entire amount is reportable in your TPAR report.

You’ll need to include the following details:

• contractor’s ABN, name, and address
• total amount paid, including GST
• GST component of the payment

You don’t need to report:

• payments for materials only, where no services are provided
• invoices that are unpaid as of 30 June each year (since TPAR is based on payments actually made)
• wages or salaries paid to employees
• payments made through labour hire firms (where they handle PAYG withholding)
• private or domestic projects not connected to your business

Check the ATO’s official guidance on payments and details you need to report.

Prepare and lodge your TPAR on time

The TPAR due date is 28 August, so prepare early to avoid last-minute rushes or ATO penalties.

Here are the basic steps to stay on top of your TPAR compliance.

Review your contractor details

Make sure you have the correct Australian business numbers (ABNs), business names, and addresses for every contractor you’ve paid during the year.

Check which payments are reportable

Confirm the payments to include in your taxable payments annual report. Remember – if the payment was for services (even if materials were part of the job), it’s reportable. If it was for goods only, you can leave it out.

Generate your report in your accounting software

If you’re using accounting software, your TPAR reporting may already be partly automated. In many systems, you can tag reportable contractors as you go, allowing the platform to track those payments. When it’s time to lodge, you may be able to review, export, or file your ATO TPAR directly from your dashboard.

Lodge your TPAR online

There are several ways to lodge your TPAR:

• through the ATO Business Portal
• with Standard Business Reporting (SBR)-enabled software – SBR is an ATO framework that allows you to submit reports like TPAR directly from your accounting software. If you use an SBR-enabled platform, you can lodge your TPAR online in just a few clicks - no manual uploads or portal navigation needed.
• through your registered BAS or tax agent

Whichever method you choose, make sure you complete your TPAR lodgement by the TPAR due date – 28 August. Missing the TPAR lodgement deadline can result in ATO penalties. These are typically calculated per 28-day period (or part thereof) that the report is overdue, and can quickly add up – especially for larger businesses.

If you’ve missed the TPAR due date, lodge as soon as possible and contact the ATO to discuss your situation.

Keep a record

Once you’ve lodged, keep a copy of your TPAR report and confirmation receipt for your records. It’s good practice to keep supporting documentation (like invoices and payment summaries) too, in case the ATO asks for them later.

By updating your records throughout the year, you’ll make TPAR reporting quick and accurate at year end. Accounting software makes this a lot easier.

Simplify TPAR reporting with Xero

Xero makes TPAR compliance simple. Once you’ve set up your suppliers correctly, Xero automatically tracks reportable payments as you go.

With Xero, you can:

• generate and review your Taxable payments annual report with ease
• flag reportable suppliers in Xero
• lodge your TPAR directly from Xero to the ATO

You’re organised throughout the year, so you spend less time on compliance and more time running your business – and there’s no scrambling at year end! Xero helps you handle the rest of your business admin, too – such as your payroll and compliance.

Get one month free

FAQs on TPAR compliance

Find answers to the most frequently asked questions about TPAR compliance below:

What is a TPAR in accounting?

A TPAR (taxable payments annual report) is a document that certain businesses (and some government entities) file with the ATO to record payments they’ve made to contractors in certain industries. It’s an essential part of TPAR compliance, helping businesses report accurately and contractors to meet their tax obligations.

What are the ATO’s TPAR requirements?

If your business operates in an industry covered by TPAR, you must report to the ATO any payments made to contractors for services if those payments make up a significant portion of your income (10% or more for most services, 50% or more for building and construction).

When is my TPAR due?

TheTPAR due date is 28 August each year, covering payments made in the previous financial year. It’s a good idea to prepare your report early to make your TPAR lodgement smooth and avoid ATO penalties.

Is TPAR on a cash or accrual basis?

You report on a cash basis – meaning you include payments when they’re actually made, not when the invoice is issued.

Do electricians need to lodge a TPAR?

Electricians who operate as a business in the building and construction industry may need to lodge a TPAR if 50% or more of their business income comes from construction services and they pay other contractors or subcontractors.