From 1/7/19 business may be denied a tax deduction for certain payments where there is a failure by the business to withhold a PAYG amount.
Importantly the measure only applies to payments made for work or services that fall into the following categories:
- Payments to employees of salary, wages, commission, bonuses or allowances subject to PAYG Withholding
- Payments to company directors subject to PAYG withholding
- Payments to religious practitioners that are subject to PAYG withholding
- Payments to individuals under labour hire arrangements that are subject to PAYG withholding
- Payments for work where no ABN is quoted by the supplier that are subject to PAYG withholding
This measure will only be triggered (and a tax deduction denied for the payment) where no amount has been withheld on the payment, or the ATO has not been notified of the withheld amount. Note that the withholding of an incorrect amount will generally not compromise the deductibility of the payment.
Business need to ensure they have the appropriate accounting systems in place in order to capture the necessary information for reporting purposes as required.