Late last year, new legislation to deny an income tax deduction for certain payments if the associated withholding obligations have not been complied with were passed.
Payments that are impacted includes salary, wages, commissions, bonuses or allowances to an employee; director’s fees; payments under a labour hire arrangement; payments to a religious practitioner; and payments for a supply of services.
The deduction is only denied where no amount has been withheld at all or no notification is made to the commissioner.
The new law will also mean businesses have to 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. Businesses should take the opportunity to review payments made to employees and contractors to ensure withholding obligations are being met.
If you have any doubt if your business is currently complying with the legislation, please feel free to contact your RCB team member.
Source: Australian Taxation Office
