Pay As You Go (PAYG) Withholding Changes
From 1 July 2019, employers cannot claim a tax deduction for payments to their employees, if the employer’s PAYG withholding obligations are not paid. This restriction for the employer’s tax deduction affects the following payments:
- Salary, wages, commissions, bonuses or allowances to an employee;
- Directors’ fees;
- Wages for religious practitioners;
- Under a labour hire arrangements; or
- For services where the supplier does not supply their Australian Business Number (ABN), excluding supplies of goods and supplies of real property.
The employer’s obligations relating to PAYG withholding are:
- Withholding the appropriate amount from the worker’s payment before paying the worker;
- Pay the PAYG withholding to the Australian Taxation Office (ATO) on time;
- Reporting to the ATO regularly on activity statements and lodge an annual report confirming your total PAYG withholding;
- Supply payment summaries detailing total payments and withholding to each of worker.
Special rules apply for payments to contractors. Where the contractors do not supply their ABN, businesses are usually required to withhold PAYG from the payment (known as the ‘no ABN withholding rule’).
The ATO will not deny a tax deduction in respect of employers where they act honestly and believe that their employees are contractors. This is provided that the employer has complied with the no ABN withholding rule where applicable.
What happens if Employers make mistakes?
Employers will not lose their deductions if an incorrect amount is withheld by mistake. Corrections of mistakes can be made voluntarily by using the approved voluntary disclosure form. If a mistake occurred when reporting, but the correct amount was withheld, taxpayers should correct the mistake as soon as possible.
Deductions will be lost only if there is a withholding or reporting requirement and no amount is withheld or reported to the ATO.
If employers do not comply with their PAYG withholding and reporting obligations for the payments, they can lose their deductions for these payments and become liable to pay penalties that apply for failure to withhold and report amounts under the PAYG withholding system.
For assistance with correcting and disclosing your PAYG payments please contact your Nexia Edwards Marshall NT Adviser.
Proposed Superannuation Guarantee Amnesty
Further to our Top Tax Tips on 10 October 2018, we note that the Bill with the proposed changes regarding superannuation guarantee amnesty has still not been passed. The proposed changes allow for a 12-month amnesty (from 24 May 2018 to 24 May 2019) from penalties for not previous non-payment of superannuation guarantee (from 1 July 1992 to 31 March 2018). If the new law is enacted, the proposed changes will apply retrospectively to voluntary disclosures made during this period (by 24 May 2019). Taxpayers currently under audit by the Australian Taxation Office (ATO) are not eligible for the benefits of the proposed amnesty.
We will update you when the proposed changes become law.
Please speak to you Nexia Edwards Marshall NT Adviser if you have questions about PAYG withholding tax or superannuation guarantee.
How can Nexia Edwards Marshall NT help you?
For any questions or to discuss any of the above in relation to your personal situation, please contact Sarah McEachern or your Nexia Edwards Marshall NT Adviser.