The Institute of Public Accountants (IPA) is recommending that an ABN withholding tax system at source be introduced for industries not covered by mandatory reporting of payments to contractors.

“Mandatory reporting has shown to be a very effective mechanism for prompting taxpayers to re-join the tax system ahead of possible detection through data matching,” said IPA chief executive officer, Andrew Conway.

“The experience shown in the construction and building industry has proven that mandatory reporting has been able to reverse entrenched longstanding non-compliance behaviour. It has encouraged reluctant contractors to engage with the tax system in a positive way.
“Not only has taxable payments reporting resulted in measurable improvements in compliance by contractors, it has exposed areas of non-compliance such as missing ABN details and invalid ABNs.

“It is time to spread the mandatory reporting to other industry sectors and recognise similar achievements realised in the construction and building industry.

“In the absence of mandatory reporting, we recommend the introduction of an ABN withholding tax system similar to that operating effectively in New Zealand.

“The explosive growth of the digital or sharing economy can play havoc with ensuring contractors are doing the right thing when compared to salary and wage earners; hence, the reason why countries such as New Zealand are bolstering their ABN withholding to address growing risk to tax revenue.

“The withholding rate can be industry specific to reflect differences in profitability or a tailored rate that a business applies for to reflect individual tax circumstances.

“An ABN withholding tax will also address the risks associated with the increasing number of self-employed businesses generated from the sharing economy,” said Mr Conway.

These recommendations form part of the IPA’s pre-Budget submission. For more information go to: