From the 2020 financial year onwards, businesses cannot claim deductions for payments to workers if they have not met pay as you go (PAYG) withholding obligations.
If the PAYG withholding rules require an amount to be withheld, to claim a deduction for a payment to a worker, the business must:
withhold the amount from the payment before paying the worker
report that amount to the Australian Taxation Office (ATO)
If an incorrect amount is withheld or reported the business will not lose the deduction. We suggest correction of the mistake as soon as possible to minimise penalties.
The deduction is lost if no PAYG amount is withheld (and was meant to be) or reported to the ATO.
What is outlined above is a very high-level view of the matter. If you think you may be affected by these changes, we recommend getting in touch with us here at Addept Accountants to learn exactly what is changing for your business administration requirements and how they can be effectively managed through the 2020 financial year and beyond.