Tax deductibility and PAYG Withholding & Reporting- Do NOT get caught on this!

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 and call our team today find out how much easier it can be.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top