Tax deductibility of ‘non-compliant’ payments
From 1 July 2019, businesses will only be able to claim deductions for payments that are made to workers (employees or contractors) when the employer has complied with the pay-as-you-go (PAYG) withholding and other tax reporting obligations for that payment.
If the PAYG withholding rules require a business to withhold an amount from a payment that the business makes to a worker, the business must:
- withhold the amount from the payment before it is paid, and
- report the amount to the ATO.
Any payments that are made where the business hasn’t withheld or reported the PAYG tax are dubbed by the ATO to be “non-compliant payments”, and for these an employer will not be able to claim a deduction.
Note however that if the employer makes a mistake and withholds or reports an incorrect amount, they will generally not lose their deduction — as long as the ATO is notified and a correction is made.
Payments that must comply
An employer can only claim a deduction for the following payments if they comply with the PAYG withholding rules. This includes payments:
- of salary, wages, commissions, bonuses or allowances to an employee
- of directors’ fees
- under a labour hire arrangement, and
- for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.
For further assistance contact Expert Tax on 0449 952 855 or 1300 8 MY TAX (1300 869 829)
Attention – Business Owners hiring employees
Small employers (those with 19 or less employees) need to start Single Touch Payroll (STP) reporting before 30 September 2019.
There is support available for employers transitioning to STP reporting, especially those who are not currently using software. For further information visit ATO website at www.ato.gov.au
What you need to do
› Decide the ‘reporting solution’ that best meets your needs. Information on reporting solutions can be found at ato.gov.au/stpsolutions
› If you are using a payroll software, talk to your provider to find out how they can help you with STP reporting
› If you employ one to four employees then you can choose a low-cost or no cost STP solution. For more information visit ATO website at ato.gov.au/stpsolutions.
Contact Expert Tax on 0449 952 855 or 1300 8 MY TAX (1300 869 829) for assistance on tax related matters.
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Benefits of using a Tax Agent
- Takes the stress out of completing your tax return.
- Saves you time, as they lodge your return for you on your behalf. Completing the form yourself can take hours.
- Can help get you more tax back by claiming all legitimate deductions that you may not be aware of.
- You can claim the cost of a tax agent as a deduction in the following year’s tax return.
- A tax agent can also provide personal advice in areas of taxation law.
What qualifications should my tax agent have?
Tax agents must be registered with the Tax Practitioners Board (TPB) before they are able to charge for their service. Some practitioners can give advice and act as tax agents without being registered, as long as they are operating under a group that is registered by the TPB.
To be eligible as a registered tax agent, the individual must have a good record with no recent convictions, involvement in tax exploitation, ongoing bankruptcies, or imprisonment. Once registered, practitioners can bear the TPB registered symbol.
You can find registered agents by visiting the Tax Practitioners Board website on www.tpb.gov.au
Expert Tax are registered Tax Agents (Tax Agent ID – 25487840).
Expert Tax can be contacted on 0449 952 855 or 1300 8 MY TAX (1300 869 829)