TPAR for builders: the 50 per cent test and 28 August

A TPAR must be lodged by 28 August each year. That is the ATO's own sentence, and it is the only date in this article that never moves. Everything else — whether you have to lodge at all, and what goes in — turns on two questions that most builders answer too quickly.

The first is whether your business counts as primarily building and construction. The second is which payments are reportable. Both have edges that cost money, and one of them reaches back into last financial year.

Who has to lodge

The ATO's rule for the building and construction industry is short. If you are running a business primarily in building and construction, you must lodge a TPAR if you:

• make payments to contractors or subcontractors for building and construction services; and
• have an Australian business number (ABN).

"Primarily" is where the work is. The ATO gives three alternative tests, and any one of them is enough:

"You are considered to be a business that primarily operates in building and construction services if any apply: - in the current financial year, 50% or more of your business income is earned from providing building and construction services - in the current financial year, 50% or more of your business activity relates to building and construction services - in the financial year immediately before the current financial year, 50% or more of your business income was earned from providing building and construction services."

The backward-looking limb is the trap

Read that third bullet again. It does not ask what you did this year. The ATO's own worked example makes the consequence explicit:

"Sascha's Cabinet Makers earned the following income from its business activities: 45% from cabinet making and 55% from carvings: for 2018–19 income year; 60% from cabinet making and 40% from carvings: for 2019–20 income year; 40% from cabinet making and 60% from carvings: for 2020–21 income year. … Although it will not earn 50% or more of its income from building and construction services in the 2021 income year, it still must report payments to contractors in the 2021 TPAR. This is because the financial year immediately before was above 50%."

So a business that is winding down its building work, or that had one heavy construction year and then moved on, still lodges for the year after. The obligation outlives the activity by twelve months.

The second limb is not about money at all

"50% or more of your business activity relates to building and construction services" is a separate test from income. The ATO's example is a property developer that sets up a project entity:

"ABC has created a separate entity called Upmarket Apartments. This entity manages the project and construction of the apartments. Upmarket Apartments must report payments to contractors for providing building and construction services. It must report because 50% or more of its business activity relates to building and construction services."

An entity that earns nothing yet — a project vehicle, a special purpose company — can still be inside the reporting system on activity alone.

Where the chain stops

The ATO's mining example draws the boundary in one move:

"Black Coal establishes a new mining facility that requires the construction of a range of infrastructure. Black Coal contracts Earl's Earthworks to carry out the work. Earl's Earthworks subcontracts the work. Black Coal doesn't need to report its payments to Earl's Earthworks. This is because all of its income is from coal mining. Earl's Earthworks must report payments it makes to subcontractors in a TPAR."

The test is applied to each business separately, not to the project. Your client's obligation says nothing about yours.

The 10 per cent rule does not apply to you

There is a percentage test that circulates widely and confuses builders every August. It belongs to the other reportable industries. The ATO's page on working out whether you need to lodge sets out the taxable payments reporting system (TPRS) services — building and construction, cleaning, courier and road freight, information technology, and security, investigation or surveillance — and then says of the percentage calculation:

"If TPRS services are only part of the services your business provides, you need to work out what percentage of the payments you receive are for TPRS services each financial year. … This doesn't apply to building and construction services you provide."

Builders use 50 per cent. Everyone else uses 10 per cent. Mixing them up in either direction produces the wrong answer.

What you report, and what you leave out

You report payments made to contractors or subcontractors for building and construction services. Two instructions decide almost every awkward invoice:

Labour and materials on one invoice. The ATO: "Report the total payment amount if an invoice you receive from a contractor includes both labour and materials." You do not split the invoice and report only the labour half.

Incidental labour. The reverse case: "Exclude the labour amount for invoices that list both materials and labour. Do this if the labour is incidental to the supply of materials." The ATO's example is a hardware supplier who fits one tap to demonstrate and charges a small labour amount — not reportable.

The exclusions are worth reading as a list, because several of them look reportable:

That last one has a boundary the ATO draws sharply. Their example: a designer with an ABN who manages the construction of her own new home and pays the trades directly "doesn't need to report payments she makes to contractors. This is because she is acting in a domestic capacity, not as a business."

The "PAYG withholding payments" row above is doing more work than it looks. Whether someone is actually a contractor at all, rather than an employee regardless of what the invoice calls them, is decided by a separate test again — and that test is what decides a different duty, superannuation, on its own facts: the subcontractor rule.

The no-ABN case is two obligations, not one

If a contractor does not quote an ABN, you are in a different provision entirely. Section 12-190 of Schedule 1 to the Taxation Administration Act 1953 requires the payer to withhold from a payment for a supply made in the course of an enterprise carried on in Australia, unless one of the exceptions applies — most commonly that "the other entity has given the payer an invoice that relates to the supply and quotes the other entity's ABN".

The section also carries its own small-payment exception, in subsection (4)(b): no withholding where the payment, disregarding GST, "does not exceed $50 or such higher amount as is specified in regulations in force for the purposes of subsection 29-80(1) of the *GST Act". That regulation specifies $75 (see the $75 and $1,000 lines), which is why the ATO's practical guidance is framed around payments over $75 excluding GST.

Having withheld, you then report the amount once — in the TPAR or on the payment summary form, not in both. The withholding duty itself, the exceptions to it, and what happens if you pay in full anyway are set out in the withholding duty is the payer's.

Cash flow, not compliance, is the reason to get this right during the year

Everything above is a reporting duty. But the data behind it is the same data that tells you what your subcontractors have cost you, project by project, and that number is usually reconstructed in August from a shoebox.

Two habits make the August lodgment a non-event:

1. Record the ABN when you set up the contractor, not when you pay them. The no-ABN withholding decision has to be made at the time of payment; discovering the gap at year end means you owe the withheld amount anyway.
2. Tag every subcontractor invoice to a project and keep the paid date. The TPAR is built on payments made on or before 30 June, not on invoices dated before 30 June. Those are different sets of numbers if anything sits unpaid at year end — and they are also the difference between knowing and guessing what a job actually cost.

What to do before 28 August

• Run the 50 per cent test on both years, this one and the one before. The backward limb catches businesses that no longer think of themselves as builders.
• Check the activity limb if you operate a project or development entity that has little or no income of its own.
• Pull payments, not invoices — paid on or before 30 June.
• Separate the no-ABN payments and decide where they are reported, once.
• If you have nothing to report, lodge a TPAR non-lodgment advice rather than lodging nothing.

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Checked on 29 August 2026 against the ATO guidance and the legislation cited above. This article describes the rules; it is not tax advice, and whether a particular business is "primarily" in building and construction can depend on facts the ATO would want to see.

What Zirko does: it keeps customers, subcontractors and their tax identifiers as records, and it ties quotes, invoices and time to a project, so the payments behind a TPAR are already grouped when August arrives. What Zirko does not do: it does not lodge a TPAR, it does not calculate PAYG withholding, and it does not talk to the ATO. Lodgment goes through ATO online services, your accounting software's TPAR function, or your registered tax agent.