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Defence Estate Quality Management System (DEQMS) BSi Certification

Procurement Connected Policy – Black Economy

The Black Economy Procurement Connected Policy aims to increase the integrity of Commonwealth Government procurement processes by promoting good tax behaviour and creating an even playing field for businesses that comply with their tax obligations. The policy levels the playing field for businesses that are already doing the right thing, by locking out their competitors that may undercut prices by not complying with their key tax obligations.

The Black Economy Procurement Connected Policy outlines the key components of the Commonwealth Government’s policy to increase the integrity of government procurement, as recommended in the Black Economy Taskforce’s final report. As this is a Commonwealth Procurement Policy, all non-corporate Commonwealth entities must comply with the policy.

As of 1 July 2019, approaches to market for Commonwealth Government contracts that are valued at over $4 million (including GST) will require all Tenderers to provide a statement from the Australian Taxation Office, showing they have a satisfactory tax record by obtaining a Statement of Tax Record (or ‘STR’). Special rules apply for tenderers that are first tier subcontractors, partnerships, trusts, joint ventures, tax consolidated groups or members of a GST group.

All non-corporate Commonwealth entities must comply with the policy when approaching the market to establish new contracts over $4 million (including GST), and in ensuring STRs remain valid and satisfactory during the contracting and contract management phases of the procurement.

Procurement entities subject to the policy must not contract with any Supplier who does not hold a valid STR.

Note: Before releasing a tender, ensure you are using the correct, updated tender documents, as they contain the requirements relating to Black Economy.

Note: Requirements to obtain an STR do not apply to Panel Engagements.

Preparing tender documents (post 1 July 2019)

  1. Make sure you use the updated tender documents found on DEQMS, as they contain the Black Economy requirements. Note – the Statement of Tax Record must be provided for all approaches to market over $4million, this includes ITRs, RFTs, RFQs, RFPs etc.
  2. The tenderers will need to provide a Statement of Tax Record for all approaches to market over $4million, to demonstrate that they hold a satisfactory tax record.
    NOTE: If a two-phase approach to market is being undertaken (eg. ITR and RFT), an STR must be requested at the ITR stage however this must remain at the RFT stage. If an STR has expired when you reach the RFT stage, a valid one must then be requested.

After tender submissions received

  1. Review the submitted Statement of Tax Record schedule (if required) to confirm that the necessary documentation has been provided. This will be either:
    • an STR Receipt – in which instance they will be required to provide a valid STR within 4 business days of the closing date and time of the approach to market (provided that they lodged an ATO issued STR receipt by the tender closing date and time); or
    • a valid STR/s (please refer to the below table, when determining if the STR/s has been submitted for all appropriate parties).
  2. NOTE: The tenderer is to provide and attach each of the valid and satisfactory STRs referred to in the table below, as applicable to the tenderer. This varies depending on whether they are a body corporate/natural person, a partnership, a trustee, a joint venture participant, a member of a Consolidated Group or a member of a GST Group.

    What documentation is required to satisfy the Black Economy Requirements
    If the Tenderer is: STRs required:
    a. a body corporate or natural person a satisfactory and valid STR in respect of that body corporate or person
    b. a partner acting for and on behalf of a partnership

    a satisfactory and valid STR:

    (i) on behalf of the partnership; and

    (ii) in respect of each partner in the partnership that will be directly involved in the delivery of any resultant contract or subcontract (as applicable)
    c. a trustee acting in its capacity as trustee of a trust

    a satisfactory and valid STR in respect of the:

    (i) trustee; and

    (ii) the trust
    d. a joint venture participant

    a satisfactory and valid STR in respect of:

    (i) each participant in the joint venture; and

    (ii) if the operator of the joint venture is not a participant in the joint venture, the joint venture operator
    e. a member of a Consolidated Group

    a satisfactory and valid STR in respect of:

    (i) the relevant member of the Consolidated Group; and

    (ii) the head company in the Consolidated Group
    f. a member of a GST Group

    a satisfactory and valid STR in respect of the:

    (i) the GST Group member; and

    (ii) the GST Group representative

Tenderers who fail to provide the correct documentation may be excluded from the process, except in the instance whereby the tenderer has provided an STR report, in which case you may seek clarification as to whether they are in possession of a valid STR.

Tenderers who submit an STR Receipt, but fail to the submit the STR within the required period are to be excluded. Clarification mechanisms may not be utilised in this instance.

What is a Statement of Tax Record?

A Statement of Tax Record (or ‘STR’) is an official document issued by the Australian Tax Office that certifies that an applicant has complied with its Australian Tax obligations, and therefore has a satisfactory tax record.

The ATO can issue two types of STRs:

  1. If applicants have four or more years of engagement with the ATO, the ATO can issue an STR that is valid for 12 months. The ATO will assess these applicants against three criteria, which are:
    • Is the applicant up to date with its registration requirements, including being registered for an Australian Business Number (ABN) and GST, and having a Tax File Number?
    • Has the applicant lodged at least 90% 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 the applicant’s operation if this is less than four years); and
    • Does the applicant have $10,000 or more in overdue debt due to the ATO? If so, has it paid this by the debt due date, or does it have a payment plan in place with the ATO?
  2. If an applicant has less than four years of engagement with the ATO (for instance, if the applicant is a new business, or is an organisation that is based outside of Australia), the ATO can issue an STR that is valid for 6 months.
    • The ATO will require that these applicants undertake to abide by the tax obligations imposed by Australian law.
    • Additionally, the applicants will have to make statements concerning their compliance with and payment of any relevant foreign tax obligations; and any tax-related convictions in the last four years (applicable to Australian and foreign entities).

Statement of Tax Record documentation

There are three types of documents that are produced when an entity applies for an STR.

  1. STR Receipt – Applicants can apply for an STR either over the phone, or by using the smartform provided on the ATO’s website.
  2. Applicants using a smartform will receive an automatically generated receipt at the time they lodge the smartform – this receipt will have a time and date stamp in the top right-hand corner, will include the ABN and name of the applying entity, and will set out some details that relate to the type of entity that is applying.

    If the applicant applies over the phone, they will receive a ‘reference ID’ number – this is essentially a record that they called the ATO at a certain date and time. Phone applicants will also receive an STR receipt by email that is similar in form to the STR Receipt generated through submission of the smartform.

    If the STR Receipt is provided, the tenderer must provide the STR within 4 business days of the closing date and time of the Approach to Market.

    An STR Receipt will appear as below:

    STR Receipt

  3. STR Taxpayer Report – If the ATO has issued an STR, it will also issue an STR Taxpayer Report. This report will include a heading that states “For your information Statement of Tax Record – Taxpayer Report”. This document is issued for the applicant’s benefit only, and includes information about the applicant’s registrations, lodgements and any outstanding payments due to the ATO. An STR Taxpayer Report is issued in respect of satisfactory and unsatisfactory STRs – that is, the fact that an STR Taxpayer Report exists is not evidence that the applicant sought, and was provided, with a satisfactory and valid STR.

  4. An STR Taxpayer Report will appear as below:

    STR Taxpayer Report STR Taxpayer Report

  5. STR - Once the ATO has determined that an applicant has complied with the relevant criteria, the ATO will issue an STR. This document is the formal record of the ATO’s decision with respect to the STR application. The STR will clearly state that it is a ‘Statement of Tax Record’ at the top of the page, will contain the legal name of the entity (as against any trading name or other business name that the applicant might use) and the associated ABN. The STR will bear an electronic signature of the Deputy Commissioner for Tax (currently Tim Dyce) and will also be date stamped.
  6. Generally, an STR will only comprise one paragraph. However, for certain entity types, the STR may include a second paragraph that includes some information about the applicant (for instance, if they are in a partnership or trust relationship, or if they are a member of a tax consolidated group or GST Group. These paragraphs indicate that it is likely the applicant should have provided other STRs to ensure it is compliant with the Black Economy Policy and the relevant Tender Documentation. Therefore, if you see more than one paragraph on an STR, you should consider whether you need to seek legal advice as to whether the tenderer is compliant.

    An STR will appear as below:

    STR STR

IMPORTANT: The STR document itself is the only document that you can accept as proof of a satisfactory and valid STR. You must not accept an STR Receipt or a STR Taxpayer Report as evidence that a tenderer has complied with the requirements of either the Tender Documents or the Black Economy Procurement Connected Policy.

Eligibility to tender and be awarded a contract

Tenderers must submit a valid STR as per the above, in order to be considered for and awarded a contract.

After a contract is awarded

If a contract included a clause that required tenderers to maintain a satisfactory STR over the term of the contract, after contract signature, contract managers are required to review the status of tenderers STRs. Contract managers may choose to check STRs for first tier sub-contractors held by the head contractor during the course of the contract.