Non-compliant Payments

Non-compliant payments

The ATO are encouraging you to let your business clients know that you can no longer claim deductions for payments to workers for tax returns lodged for the 2020 income year onwards if they have not met their PAYG withholding obligations.

As an employer, you must collect PAYG withholding amounts from payments you make to your employees to ensure they meet their end-of-year tax liabilities. This requires you to withhold the amount from the payment to your employee before you pay them. Then you must report the amount withheld to the ATO.

Your payment will be considered non-compliant if you make a payment to a worker and you have not reported or withheld the PAYG amounts.

If you comply with the PAYG withholding and reporting requirements, you can claim a deduction for the following payments. These are payments:

  • Of salary, wages, commissions, bonuses or allowances to an employee
  • Of directors’ fees
  • To a religious practitioner
  • Under a labour hire arrangement
  • For a supply either wholly or partly of services where the contractor has not provided you with their ABN

What happens if a mistake is made?
If a mistake is made you will not lose the deduction. To minimise penalties you can correct any mistakes made by lodging a voluntary disclosure in the approval form.

Any mistakes made should be corrected as soon as possible.

The measure is part of the government’s response to recommendations from the Black Economy Taskforce. The black economy involves both the dishonest and criminal activities that misuse or abuse the tax and regulatory systems. The black economy puts pressure on businesses and individuals who are doing the right thing.

The measure will attempt to ensure businesses are honest and are doing the right things by their workers.

If you need assistance to ensure you are compliant with your PAYG obligations, click here to contact us today.

Financial Planning services provided as Authorised Representatives of Power 2 Financial Services Pty Ltd ABN 51 164 747 595 Australian Financial Services Licence No. 444078