Subcontractor arrangements are common across Australian industries — construction, cleaning, courier services, IT, and security are among the most frequent. For bookkeepers, these arrangements create a cluster of compliance obligations that are easy to overlook if you're not specifically watching for them. From Taxable Payments Annual Reports to super guarantee on certain contractor payments, here's what you need to build into your standard workflow.
Taxable Payments Annual Report (TPAR): Who Must Lodge
The Taxable Payments Annual Report (TPAR) is an annual report that certain businesses must lodge with the ATO, disclosing the total amount paid to each contractor (ABN, name, address, gross amount, GST) during the financial year. The ATO uses TPAR data to cross-reference contractor income declarations — if a contractor doesn't report the income, the ATO's data matching picks it up.
Industries currently required to lodge TPAR include: building and construction (where any part of income is from relevant activities), cleaning, courier and road freight, information technology, security, investigation, or surveillance services, and mixed businesses that earn 10% or more of their income from a listed service.
TPAR is due by 28 August each year for the prior financial year ending 30 June. The practical implication for bookkeeping is that you need to capture the contractor's ABN, full legal name, and address at the time of onboarding — not retrospectively at lodgement time. Build a contractor register into your standard onboarding checklist. If a client pays a contractor without getting an ABN, they're required to withhold 47% of the payment under the no-ABN withholding rules. This is a powerful incentive to collect ABNs upfront, and it's a conversation you should have with every client who uses contractors.
Voluntary Withholding Agreements
Unlike employees, contractors are generally responsible for their own tax obligations. But the ATO allows contractors to enter into voluntary withholding agreements with their engaging businesses. Under such an agreement, the business withholds PAYG at a set rate from payments to the contractor and remits it to the ATO on the contractor's behalf — similar to PAYG withholding for employees.
From a bookkeeping perspective, voluntary withholding agreements must be in writing (the ATO provides a standard form), and the withheld amounts must be reported and remitted through the client's PAYG withholding activity statement obligations. The contractor receives a payment summary (or income statement via STP if the payer uses STP for this purpose) showing the amounts withheld.
These agreements are uncommon but not rare — sole traders with variable income who want to smooth their tax payments sometimes request them. If a client mentions that a contractor has asked for withholding, make sure the correct documentation is in place before processing the first payment, and set up the withholding category correctly in the payroll or accounts payable system so the amounts are captured and remitted accurately.
Superannuation on Contractor Payments
One of the most common compliance errors in subcontractor arrangements is the failure to pay superannuation guarantee (SG) when it's legally required. The misconception is straightforward: "they're a contractor, not an employee, so super doesn't apply." That's not always true.
The super guarantee rules extend to workers who are engaged under a contract that is wholly or principally for their labour — even if they have an ABN, issue invoices, or consider themselves self-employed. If the work is predominantly personal exertion (rather than the supply of equipment, materials, or a result), super at 11.5% (rising to 12% from 1 July 2025) is payable.
The clearest examples: a sole-trader carpenter who comes to site with their own tools but is essentially doing the same work as an employed tradie, day after day. A graphic designer engaged on a retainer who produces designs personally. A part-time bookkeeper engaged through their own ABN but working exclusively for one client.
The ATO's employee/contractor decision tool helps, but it's not definitive for every arrangement. Where there's ambiguity, the safer approach is to pay SG and avoid the risk — unpaid SG attracts the Super Guarantee Charge, which includes interest and administration penalties, and cannot be deducted by the employer.
Sham Contracting: The Risk You Must Recognise
Sham contracting occurs when an employer misrepresents what is genuinely an employment relationship as an independent contractor arrangement — typically to avoid paying award rates, leave entitlements, and superannuation. The Fair Work Act prohibits this, and enforcement has increased significantly in recent years.
Bookkeepers are not employment lawyers, but you will sometimes process arrangements that have the hallmarks of sham contracting: a worker engaged exclusively by one business, paid at an hourly rate rather than for a result, subject to the business's direction and control, using the business's equipment and tools. If you see these patterns, particularly in industries with known contracting issues (construction, cleaning, care sector), it's worth raising the question with the client and recommending they get a legal opinion before you continue processing payments in the contractor rather than employee system.
The consequences for a client found to have sham contracted are serious: back-payment of wages, super, and leave entitlements at award rates; Fair Work penalties of up to $19,800 per contravention for an individual and $99,000 for a body corporate; and potential ATO action for unpaid PAYG and SG. You're not the compliance officer, but flagging a recognisable risk is part of your professional obligation.
Building Contractor Compliance Into Your Workflow
The practical steps to stay on top of subcontractor compliance are straightforward:
- Create a contractor register at onboarding: ABN, legal name, address, services provided, whether a voluntary withholding agreement is in place.
- Review each new contractor relationship for SG obligations — document your conclusion.
- Track all contractor payments through the year in a format that can be extracted for TPAR lodgement.
- Diarise TPAR lodgement for 28 August and prepare the report in early August before the rush.
- At end of financial year, review the contractor list for any arrangements that may have evolved to look more like employment.
None of these steps takes much time as a regular part of your workflow. Left undone, they can create significant clean-up work — and significant risk for your clients.