Do you still make cash payments to employees or contractors?
The ATO have recently reported that any “cash in hand” payments made to employees from 1 July 2019, will be no longer deductible. The ATO have also made contractor payments, where the contractor does not supply an ABN and/or the employer does not withhold the correct amount of tax, (the top marginal rate of tax, being 45%) non-deductible as of the same date.
Businesses “doing the right thing” and withholding the required tax will not be affected, even if an honest mistake has been made in reporting/withholding the incorrect amount. The introduction of the new rules is to target businesses operating in the black economy and failing to comply with their withholding obligations.
The ATO has reported the black economy costs the community as much as $50 billion and given the recent expansion of the Taxable Payments Annual Reporting to industries further afield, (Couriers, IT services, cleaning services to name a few) the ATO are seriously clamping down on the cash economy. All businesses should review their current contractors and ensure valid ABN’s have been provided.
Including the loss of the tax deduction, businesses found to be non-compliant may be penalised for failing to withhold and report amounts under the PAYG system. The ATO are encouraging employers who have failed to report their PAYG obligations to come forward and will avoid losing their tax deduction, along with potentially reduced penalties.
The ATO are making significant steps to brining non-compliant employers to justice. Given their sophisticated data-matching technology and further injection of $$’s into their black economy task force, the ATO are finding and catching more and more non-compliant businesses.
As previously reported, the introduction of STP (Single Touch Payroll) was a big step forward into finding non-compliant employers. The STP reporting requirements can only be seen as a positive step for employees, as the ATO will be able to closely monitor employers and their subsequent withholding/superannuation obligations.
Do you still pay contractors cash payments? If so, please feel free to contact our accountant team and discuss your current arrangements or concerns you may have around cash payments.