Employers’ PAYG Withholding obligations
Business owners normally are able to claim a tax deduction on their wages paid, regardless of whether they have fulfilled the ATO’s PAYG Withholding and reporting obligations for that payment.
The rules are changing from 1 July 2019…
From 1 July 2019, business owners can only claim payments they make to their workers where they have compiled with the pay as you go (PAYG) withholding and reporting obligations for that payment.
This new rule applies to both payments made to employees and contractors, and payments made of the following nature:
- Salary, wages, commissions, bonuses or allowances to an employee
- Directors’ fees
- Payments to religious practitioner
- Payments made under a labour hire arrangement
- Payments made for a supply of services where the contractor has not provided you with their ABN.
The PAYG Withholding rules
The PAYG withholding rules require business owners to withhold an amount from a payment they make to a worker before they pay it, and report the amount withheld to the ATO.
If business owners did not withhold or report the PAYG withholding amounts to the ATO, the payments will become non-compliant. As a result they will not be able to claim a deduction. However if this is a genuine mistake and the business owners make efforts to rectify the situation by withholding or reporting the amount through a voluntary disclosure, they may be able to claim the deduction.
Is your business compliant with the rules? Do you want to know more about the new rules and how to ensure your payments remain compliant? Email us and we can help.