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PAYG withholding: New penalties for non-compliance

New penalties for business’s pay-as-you-go (PAYG) withholding and reporting obligations are to be introduced as a result of legislation commencing 1 July 2019. The law will now prevent businesses from claiming deductions for payments to employees and certain contractors if they fail to comply.

Payments that are impacted include salary, wages, commissions, bonuses or allowances to an employee, payment under a labour-hire arrangement, payment to a religious practitioner, or payments for a supply of service. This measure highlights a key reason why governance over all employment tax is important.

Specifically, the new laws will prevent an employer from claiming a deduction for payments to employees if the employer fails to:
Withhold an amount from the payment as required under PAYG withholding rules; or
Report a withholding amount to the ATO as required.

If you make a mistake by failing to withhold an amount or to report it, your business will not lose its deduction if you voluntarily disclose this to the ATO before an audit or other compliance activity in regards to your tax affairs. Taking early action to ensure your business is compliant to these updated PAYG withholding laws will make a difference to whether you remain eligible for deductions.

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What Are The Consequences Of Improperly Lodged Tax Returns?

May 4, 2021

With tax return season approaching quickly this year, you may have already started looking into lodging your income tax return. Ensuring that your details are correct and that any information about your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent. However, if during this income tax return process the tax obligations of the taxpayer fail to be complied with, the Australian Taxation Office has severe penalties that they can enforce.

Australian taxation laws authorise the ATO with the ability to impose administrative penalties for failing to comply with the tax obligations that taxpayers inherently possess.

As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not. In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to a tax law.

The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which are as follows:

If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:

To ensure that the statements, returns and lodgements are done correctly, and avoid the risk of potential penalties, contact us today. We’re here to help.