New penalties for business’s pay-as-you-go (PAYG) withholding and reporting obligations are to be introduced as a result of legislation commencing 1 July 2019. The law will now prevent businesses from claiming deductions for payments to employees and certain contractors if they fail to comply.
The following payments that may be impacted are:
- Salary, wages, commissions, bonuses or allowances to an employee
- Director’s fees
- Payments to a religious practitioner
- Payments under a labour hire arrangement, or
Specifically, the new laws will prevent an employer from claiming a deduction for payments to employees if the employer fails to:
- Withhold an amount from the payment as required under PAYG withholding rules; or
- Report a withholding amount to the ATO as required.
On-Time BAS lodgement is key
If you want to hold onto your deductions, then the on-time lodgement of your BAS is now as important as ever.
Further to that, businesses should take particular care in obtaining a valid ABN from their suppliers and to withhold at the top marginal rate of tax if an ABN is not provided.
I have made a mistake, will I be penalised?
If you make a mistake by failing to withhold an amount (or to report it), you will not lose your deduction if you voluntarily disclose this to the ATO before it commences an audit or other compliance activity in relation to your tax affairs. However, don’t rely too heavily on this because the ATO’s data collections systems are fairly sophisticated at picking up non-compliance in real time, particularly with Single Touch Payroll going live for all employers on 1 July 2019.
Ensure your business is compliant
Now is a good time to check that your PAYG withholding affairs are in order. Taking early action to correct and disclose PAYG withholding mistakes will make a big difference to whether your business remains eligible for deductions. Rest assured, MJJ can assist you with the process of correcting and disclosing to the ATO any mistakes that may arise.