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From July 1 2019, taxpayers will not be able to claim deductions from payments unless the associated withholding obligations have been satisfied.

This provides a greater incentive for employers to comply with their withholding obligations and encourages proper reporting of wages and payments to contractors.

It’s important to understand this new law and how it might apply to your business to avoid penalties or losing tax deductions.

What you need to do

Tax deductions will not be available for payments unless you have complied with the Pay as you go (PAYG) withholding obligation. To claim deductions, PAYG must be withheld from the payment before you pay your employee and reported to the Australian Tax Office (ATO).

Deductions may relate to:

  • Salary, wages, commissions, bonuses or allowances to an employee;
  • Directors’ fees;
  • Payments to a religious practitioner;
  • Payments under a labour hire arrangement; or
  • Payments for a supply of services where an ABN has not been provided.

What you need to do

  1. Review your current PAYG policies and information to ensure you are compliant.
  2. If an error is found, you or your tax agent can make a voluntary disclosure to the ATO to correct that error. The voluntary disclosure must be in the approved form and will minimise penalties and interest charged.

Your deduction will still be available if you take the following action:

  • PAYG was not withheld – lodge a voluntary disclosure before the ATO begins an examination.
  • An incorrect amount was withheld by mistake – correct mistake by lodging a voluntary disclosure.
  • A correct amount was withheld but reported incorrectly – lodge a revised activity statement.
  • A PAYG amount was overstated – lodge a revised activity statement.

Learn more 

If you would like to learn more about your obligations, please contact your Pilot advisor, Julie Bennett or Kristy Baxter on (07) 3023 1300 or info@pilotpartners.com.au.