Removing tax deductibility of non-compliant PAYG payments

From 1 July 2019, an employer can only claim deductions for payments made to employees or contractors where an employer has complied with the Pay As You Go (PAYG) withholding and reporting obligations for that payment.

If the PAYG withholding rules require an employer to withhold an amount from a payment they make to an employee or contractor, they must withhold the amount from the payment before they pay it and report the amount to the ATO.

Any payments made where the PAYG amount has not been withheld or reported are called ‘non-compliant payments’. Non-compliant payments are not eligible for a deduction. If a mistake is made and the employer has withheld or reported an incorrect amount, the employer will not lose their entitlement to a deduction.

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