Friday, November 23, 2018
Australia is to require businesses seeking to tender for significant federal government procurement contracts to demonstrate their record of tax compliance.
From July 1, 2019, tenderers for procurement contracts worth over AUD4m (USD2.9m) (inclusive of goods and services tax) will need to provide a statement from the Australian Taxation Office (ATO) to show that they have a satisfactory tax record.
The measure was first announced at the 2018-19 Budget, following a recommendation by the Black Economy Taskforce. The Government has now issued draft guidelines on Government Procurement Policy, which includes a description of the satisfactory Statement of Tax Record (STR) requirement.
The aim of the reform is to disrupt suppliers that are able to make more competitive bids at the procurement point because they have saved costs by not complying with their tax and superannuation obligations.
A satisfactory STR will be issued if the following conditions are met by the tenderer: they are up to date with registration requirements; they have lodged at least 90 percent of all income tax returns, Fringe Benefit Tax returns, and Business Activity Statements that were due in the last four years or the period of operation if less than four years; and if, on the date the STR is issued, the tenderer does not have AUD10,000 or more in outstanding debt to the ATO (if they have entered into a payment plan with the ATO, they will have met this criterion).
STRs will be valid for 12 months from the time of issue.
The changes will be phased in, with the requirements to be limited in the first year. Results from the first year will be assessed and used to refine guidance where required, and could lead to additional criteria being taken into account in determining a satisfactory tax record.
A consultation on the proposed guidance closes on December 21.