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Businesses can no longer claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations. This applies to income tax returns lodged for the 2020 income year onwards.
As an example, if you pay your employee’s weekly a net cash wage but don’t withhold tax and report and pay this to the ATO as is required – you will be denied a tax deduction for the wages you have paid to your employees.
If PAYG withholding rules require an amount to be withheld, you must:
You will not lose your deduction if you withhold:
You will only lose your deduction if no amount is withheld or reported to the ATO, unless you voluntarily disclose this before they examine your affairs.
This measure aims to level the playing field for honest businesses doing the right thing by their workers. It is part of the government’s response to recommendations from the Black Economy Taskforce.
AGS Financial Group Pty Ltd, ABN 70 093 990 946, trading as AGS Financial Group, are authorised representatives of AMP Financial Planning Pty Limited ABN 89 051 208 327 (Australian Financial Services Licence No. 232706). Accounting, taxation, and business advisory services are provided by AGS Accounting Pty Ltd ABN 12 166 728 696. AGS Accounting Pty Ltd is a member of Chartered Accountants Australia & New Zealand. Liability limited by a scheme approved under Professional Standards Legislation. Any advice on this page is general in nature and does not take into account your personal objectives, financial situation or needs. Accordingly, you should consider the product disclosure statement for any product and your own objectives, financial situation and needs before acting on this information and before acquiring a financial product. You can obtain a copy by contacting us on 02 9966 8188.
Financial planning, corporate benefits and mortgage services are provided by AGS Financial Group Pty Ltd ABN 70 093 990 946, an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 (AMPFP), AFS Licence No 232706. Accounting, taxation, and business advisory services are provided by AGS Accounting Pty Ltd ABN 12 166 728 696. AGS Accounting Pty Ltd is a member of Chartered Accountants Australia & New Zealand. Liability limited by a scheme approved under Professional Standards Legislation.