17 Dec Government contracts and tax compliance
Do you run a business that would like to bid on Commonwealth government contracts or is likely to do so in the future? From 1 July 2019, the government is seeking to exclude from the tender process those businesses that do not have a “satisfactory tax record (STR)”. The initiative would apply to all tenders with an estimated value of over $4m (including GST) for all goods and/or services including for construction services. Those companies wishing to tender must either provide a satisfactory STR that is valid for at least 2 months at the time of the tender closing, or in circumstances where a satisfactory STR has not been issued, provide an STR receipt demonstrating that an STR has been requested from the ATO and then provide the STR no later than 4 business days from the close of tender and before the awarding of the contract. To obtain a satisfactory STR from the ATO, the business must be up-to-date with registration requirements (ie ABN, GST, TFN etc), have lodged at least 90% of all income tax returns, FBT returns and BASs that were due in the last 4 years or the period of operation if less than 4 years, and not have $10,000 or greater in outstanding debt due to the ATO on the date the STR is issued. This does not include debt subject to a taxation objection, review or appeal or debt that is a part of a payment plan with the ATO. When an STR is issued, it will usually be valid for 12 months from the time of issue.
Those businesses that do not hold an Australian tax record with the ATO of at least 4 years will generally receive STRs that are only valid for 6 months. There may also be additional requirements in relation to obtaining STRs for subcontractors, foreign companies, partnerships, trusts, joint ventures and tax consolidated groups. Depending on how well the policy runs in its first year, the government is open to introducing further criteria to determine an STR. Note this initiative is not designed to replace existing due diligence and checks that are already undertaken.
Get on the front foot with your business by getting all your tax obligations in order. If you’re planning to expand your business, we can help you map out your plan for a smooth evolution.