RCTI and TPAR basics for subbies and contractors

RCTI and TPAR are two of the acronyms that catch subbies and the contractors who pay them. They are not complicated once you see what each is for: one is a way to handle invoicing, the other is a yearly report to the ATO. This is general guidance, not tax advice, so confirm the current rules and dates with the ATO or your accountant.

RCTI: when the payer writes the invoice

Normally the supplier issues the tax invoice. An RCTI, a recipient-created tax invoice, flips that around: the business receiving the work issues the tax invoice instead. In construction this is common because the head contractor often works out the subbie's payment from measured quantities or timesheets, so it is simpler for them to generate the invoice.

An RCTI is only valid when specific conditions are met:

• The supply is one the ATO allows RCTIs for.
• Both parties are registered for GST.
• There is a current written agreement between them stating the recipient will issue the tax invoice and the supplier will not issue their own for the same supply.
• Both parties keep a copy of that agreement and the RCTIs.

If those conditions are not all met, do not use an RCTI. The subbie issues a normal tax invoice instead. The practical point for subbies: if your head contractor pays you via RCTI, make sure you have signed the agreement and that you are not also issuing your own invoices for the same work, or the GST records get tangled.

TPAR: the yearly report on what you paid contractors

The Taxable Payments Annual Report (TPAR) is a once-a-year report to the ATO. Businesses in certain industries, building and construction among them, must report the total payments they made to contractors during the financial year. It is the ATO's way of cross-checking that contractors declare the income they were paid.

If you pay subbies in a covered industry, you very likely have to lodge a TPAR. For each contractor you generally report:

• Their ABN, name and address.
• The gross amount you paid them for the year, including GST.
• The GST included in those payments.

The report is generally due by 28 August after the end of the financial year, covering the year to 30 June. Dates can change, so confirm the current deadline on the ATO website. Late lodgement can attract penalties.

The common thread: capture ABNs and payments as you go

Both RCTI and TPAR get painful when records are reconstructed at year end. The fix is the same for both: capture each subbie's ABN and details upfront when you engage them, and record every payment cleanly through the year with the GST broken out.

Do that and an RCTI is a click rather than a hunt for the agreement, and the TPAR is a report you generate rather than a scramble across a year of bank statements. A subbie and job tool that holds each contractor's ABN, links payments to jobs, and tags what is reportable turns both of these from August stress into a routine export. For the precise RCTI conditions and the current TPAR deadline, check the ATO or your accountant before you lodge.