Australia Moves to Deny Deductions for Wages If Employer Fails to Withhold

The Australian Tax Office has begun to implement legislative tax changes from April 5, 2019, under which employers who do not withhold Pay as You Go (PAYG) amounts will be denied deductions for the wages on their own returns. 

Under Australian law, all remuneration is subject to PAYG, whether in the form of salaries and wages, director fees, labor hire, or certain goods and services.  In addition to simple failures of withholding on current wages, situations also occur where determinations are made late that payments are subject to withholding. In such situations, the employer is required to notify the ATO.

The new rules go into effect July 1, 2019.  

The ATO said it will make allowances for mistakes and genuine errors, such as reporting or withholding an incorrect amount, or incorrectly categorizing an employee as an independent contractor.  However, employers are advised to promptly report these errors to avoid losing their deductions.  The ATO is applying increased scrutiny to the declaration and reporting of salaries and wages in general.

How This Impacts Mobility

Worldwide ERC® members with employees in Australia must review their wage withholding processes and ensure compliance with PAYG requirements, or risk losing deductions on their own income tax returns.

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