Taxation Law Update
July 03, 2019
Builders are already required to withhold PAYG from payments made to contractors who do not provide an Australian Business Number (ABN). From 1 July 2019 the consequences of not withholding PAYG when required become more serious.
There is an existing requirement to withhold PAYG when paying contractors who do not quote an Australian Business Number (ABN). There is already an offence for failing to withhold in this situation. From 1 July 2019 there is an additional problem with not withholding. The business who has paid the contractor without withholding PAYG will not be able to claim the payment to the contractor as an income tax deduction. This also applies to not withholding PAYG for employees.
This change to the income tax deduction rules could have significant impacts on your assessable income if payments to contractors are a major cost to your business and you fail to get ABNs or do not comply with withholding PAYG rules. Without being able to claim these payments as income tax deductions your assessable income will be higher and your income tax bill higher. The way to avoid this outcome is to make sure that contractors provide an ABN in their quotes and invoices. It is also recommended that you regularly ensure that the ABN is current and ideally that the contractor is registered for GST as well.
Further information can be found at the ATO website.