If you are running a business, you can no longer claim deductions for payments to employees/workers if you have not met your Pay As You Go PAYG Withholding obligations.

What is PAYG Withholding?

As an employer, you have a role to play in helping your payees meet their end-of-year tax liabilities. You do this by collecting pay as you go (PAYG) withholding amounts from payments you make to:

  • your employees;
  • other workers, such as contractors, that you have voluntary agreements with;
  • businesses that don’t quote their Australian business number (ABN).

When does this commence?

This rule applies to tax returns lodged for the 2020 year onwards.

The PAYG rules require that you:

  1. Withhold the tax amount from the payment before you pay your employee; and
  2. Report that amount to the ATO – in a Business Activity Statement (BAS)

You will only lose your tax deduction if no amount is withheld or reported to the ATO unless you voluntarily disclose this to the ATO before the ATO ever audits you.

These new laws will level the playing field for businesses doing the right thing by their employees. It is essential to note that even though the Australian Taxation Office is focussing on delivering the Government’s emergency stimulus measures in response to the Coronavirus pandemic, this is one measure that will still receive attention.

Next Steps

If you would like to make sure you are doing the right thing, meeting your PAYG Withholding obligations, and are able to claim a deduction, please contact us to Join the conversation…

Share This