From 1 July 2019, if PAYG withholding rules require a business to withhold and report an amount from a payment to employees and contractors, and they fail to do so, they cannot claim a tax deduction on the payments. Those payments are:
- Salary, wages, commissions, bonuses or allowances to employee
- Directors’ fees
- To a religious practitioner
- Under a labour hire arrangement
- To contractors who supply services and have not provided an ABN.
A business will not lose tax deduction if they correct their mistakes by lodging a voluntary disclosure form to the ATO as soon as possible. Those mistakes could be:
- Withhold incorrect amount by mistake,
- Should have withheld a PAYG amount but didn’t,
- Withheld a PAYG amount but didn’t report any amount to the ATO.
If a business honestly believes their employee is acting as a contractor, and so believe they are not obliged to withhold PAYG tax from payments as the “contractor” has provided their invoices and ABN, a business will not lose their deduction on the payment. Again, the business can correct their mistake by lodging a voluntary disclosure in the ATO approved form.
As Single Touch Payroll rolls in for the 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.
We are Xero Certified Advisers and offer payroll tax advice and software set-up services. We can take away the stress and worry out of PAYG administration & reporting.
For more information, please visit www.beyondtaxation.com.au and call our team today find out how much easier it can be.