Are you a contractor or an employer in a small business who pays your employees ‘cash in hand’?
The ATO has made an important announcement that just may affect you and your business.
From the 1st of July 2019, for employers who issue ‘cash in hand’ to their workers, these payments will no longer be tax deductible.
Confused about what exactly classifies as a ‘cash in hand’ payment? According the ATO, ‘cash in hand’ refers to any payments which are made to employees which aren’t in compliance with ‘PAYG’ (or ‘pay as you go’) withholding obligations.
Additionally, heavy penalties will also be dished out for employers who are not complying with the PAYG withholding obligations. This includes any employer caught under reporting information, as well as those caught failing to withhold.
Employers who incorrectly classify an employee as a contractor, will not lose any deductions, as long as their employee has provided them with an ABN.
Contractors should also note that payments received without providing an ABN, and where the business fails to withhold any tax, will also no longer qualify as tax deductible from the 1st of July.