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  • Deductions for payments to workers

    Your business clients cannot claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations. This applies to income tax returns lodged for the 2020 income year onwards.

    If the PAYG withholding rules require an amount to be withheld, to claim a deduction for a payment to a worker, your client must:

    • withhold the amount from the payment before they pay their worker
    • report that amount to us.

    If your client makes a mistake and withholds or reports an incorrect amount, they will not lose their deduction. You should still help them correct their mistake as soon as possible to minimise penalties.

    Your client will only lose their deduction if no PAYG amount is withheld (and was meant to be) or reported to us. They will not lose their deduction if they voluntarily disclose this to us before we tell them we have commenced an audit or other compliance activity involving their PAYG withholding obligations or deduction claims. The appropriate method to make a voluntary disclosure will depend on whether your client failed to withhold or report.

    If we select your client for an audit or other compliance activity, we will be in touch with the contact on the client's account. We will let them know the scope of the audit and the period(s) under review. We may contact them by telephone, in person or in writing.

    See also:

    Last modified: 18 Nov 2019QC 60631