Completing your business income tax return
You can claim the salary or wages you paid as a deduction in your business' income tax return. The attributed amount, however, is not a deduction - instead you exclude this from your business' assessable income.
Your business can't claim a deduction in its income tax return for the amount of tax it paid as additional PAYG withholding. Amounts of tax your business pays under this obligation are credited to each individual who produced the PSI and had personal services income attributed to them in their individual income tax returns.
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After the end of each income year, your business must:
Your business is required to give a payment summary to each individual the income was attributed to by 14 July following the end of the income year. Each individual receives credits in their individual tax return for the amounts that your business withheld.
You will need to include any:
- salary or wages you promptly paid to individuals and amounts you withheld from those payments in the form PAYG payment summary - individual non business (NAT 0046)
- income you attributed to each individual who produced the PSI and amounts you withheld from that income in the form PAYG payment summary - business and personal services income.
Completing an annual report
By 14 August each year, your business has to report its PAYG withholding information for the year to us. You can report either electronically or on paper.
For tax agents, an extension of time to lodge the report may be available – for example, to the date of lodgment of the business' tax return. Tax agents need to check our current lodgment program to check whether an extension of time applies.
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Salary or wages in the following income year
If your business makes payments of salary or wages to you between 1 and 14 July (after the end of the income year) and is affected by the PSI rules then, for the purpose of the PSI rules, the payments are treated as having been received on 30 June of the previous income year.
These payments must be included in your:
- business' activity statement covering the month of July
- payment summary for the previous income year
- business' annual PAYG report for the previous year.
Payments to associates for non-principal work
Your business can't claim a deduction for salary or wages paid to an associate employee for performing non-principal work. The salary or wages are not included in the associate's assessable income. Instead, these amounts are included in the attributed income of the individual who produced the PSI. In circumstances where more than one individual produced the PSI, a proportion of the associate’s assessable income should be calculated on a reasonable basis.
However, you can include amounts in the attributed PSI payment summary of the individual generating the PSI as payments of attributed PAYG withholding amounts if:
- your business withheld amounts from salary or wages paid to an associate for non-principal work
- you have not yet issued the payment summaries for the service provider and the associate.
The associate must not receive a payment summary for salary or wages paid out of the attributed PSI.
If you have already issued payment summaries to the service provider and to the associate, then either:
- your business can issue a letter to each of them amending the payment summary with a copy for them to send to us when lodging their tax returns
- the associate can lodge their income tax return showing no income in the form of salary or wages from your business but claiming the amount of tax withheld – they must include additional information with their tax return explaining their circumstances.