Rules for claiming deductions for wages and other payments to workers and business owners themselves are changing.
From 1 July 2019, employers can claim tax deductions for the following payments only if they meet the PAYG withholding requirements:
Salary, wages, commissions, bonuses and allowances to employees
Directors’ fees
Payments to a religious practitioner
Payments made under a labour hire arrangement
Payments made for a supply of services to a contractor where ABN is not supplied
Where the PAYG withholding rules require an amount to be withheld, the business owner must:
withhold the amount from the payment before they pay their worker (or themselves)
report that amount to the ATO
The link below from the ATO website includes various PAYG withholding calculators for different payments types:
However, in the following circumstances, business owners won't lose their deduction if they withhold:
the correct amount but make a mistake when reporting – a revised activity statement should be lodged as soon as possible
an incorrect amount by mistake –voluntary disclosure in the approved form should be lodged to minimise any penalties; a voluntary disclosure should satisfy the following requirements:
provide sufficient information required for the ATO to work out what the error or correct position is
provide the information in the required manner, such as by letter, through an approved ATO electronic channel, or (in limited circumstances) by phone or face-to-face
ensure that it contains a declaration signed by the business owner or an authorised person
Business owners will only lose their deduction if there is a withholding or reporting requirement and no amount is withheld or reported to the ATO, unless they make a voluntary disclosure in the approved form before the ATO commences an audit.
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