This could be a significant trap for those not prepared and those looking to tender would be well advised to get their house in order now.
In November 2018, the Government released its draft Procurement Connected Policy Guidelines for consultation. Under the proposed guidelines, businesses that are not able to provide a satisfactory Statement of Tax Record (STR) from the Australian Taxation Office (ATO) will not be able to tender for large Federal Government projects.
Businesses tendering for Commonwealth Government procurement projects in excess of $4 million (GST inclusive) will be required to provide a STR that supports their general compliance with the tax obligations, for new tenders from 1 July 2019.
The STR will be included in the tender submission as required. It will be available upon request from the ATO within four business days from the application and valid for 12 months from the time of issue.
Broadly, the STR will include an overall statement indicating whether a tenderer has a satisfactory tax record, based upon the following conditions:
- the tenderer is up-to-date with its registration requirements (e.g. the entity has a TFN, ABN and is registered GST);
- the tenderer has lodged at least 90% of all income tax returns, FBT Returns and BASs that have fallen due in the last four years;
- the tenderer does not have $10,000 or more in outstanding debts due to the ATO at the time of issue of the STR (excluding debt subject to objection, review or appeal).
The measures include all types of business structures such as companies, trusts, partnerships and joint ventures. For trusts and partnerships, the STR will be required for the subject entity as well as each trustee or partner. Where the tenderer is part of a tax consolidated group, the head company and the subsidiary tenderer will need to produce a valid STR.
New businesses and foreign tenderers that do not have an Australian record of at least four years in Australia will need to state on behalf of the foreign tenderer that it:
- is a non-resident with no tax record or a record of less than four years;
- will comply and pay Australian tax obligations;
- has no tax or criminal convictions in the last four years; and
- is complying with its foreign tax obligations.
It is understood that where an unsatisfactory report is published, the tenderer will be able to work alongside the ATO to take corrective action.
We note that the Policy is not intended to replace the existing due diligence procedures and checks that are currently undertaken. Nor is it intended to signify the financial viability of a tenderer.
The policy components as proposed for the first year are limited to provide a smooth transition. If enacted it is understood that future developments to determine a satisfactory tax record could include whether:
- the entity is compliant with superannuation law and PAYG obligations;
- entities disclosing information about its tax affairs under the voluntary tax transparency code;
- directors have been issued with court order penalties; and
- there have been any convictions for phoenix behaviour, bribery and corruption.