From 1 July 2019 and for income tax returns yet to be lodged for the 2020 financial year onwards, as part of tackling the black economy, the ATO will not allow tax deduction for cash payments to employees that do not comply with pay as you go (PAYG) withholding obligations.
The ATO recognise that transacting in cash is a legitimate way of doing business. However, it is illegal and unfair when cash is used to deliberately hide income to avoid paying the correct amount of tax or superannuation.
If a business provides goods or services instead of paying cash for employees’ salary or wages, the business still needs to report and pay the PAYG amount to the ATO for the deduction to be claimable.
As Single Touch Payroll kicks in for majority of small business owners from 1 July, a business must electronically report the PAYG withheld and super liabilities to the ATO every time an employee is paid.
Don’t be caught out by non-deductibility of payments and administrative penalties due to non-compliance of PAYG withholding and reporting obligations.
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For more information, please contact Beyond Taxation firstname.lastname@example.org or call 1300 552 993 for further clarification.