'Cash in hand' payments to workers no longer tax deductible
The Australian Taxation Office (ATO) today reminded employers that any ‘cash in hand’ payments made to workers from 1 July 2019 will not be tax deductible.
‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go (PAYG) withholding obligations. Payments made to contractors where the contractor does not provide an ABN and the business does not withhold any tax will also not be tax deductible from 1 July.
Assistant Commissioner Peter Holt said the new rules have a dual purpose of levelling the playing field for honest businesses that are doing the right thing by their workers as well as tackling the black economy.
“It’s fairly straight-forward: do the right thing and you can claim a deduction. Deliberately do the wrong thing and you’ll miss out on a deduction and risk being penalised”, Mr Holt said.
This new measure will take effect for payments made to workers from 1 July 2019 for income tax returns lodged for the 2020 income year onwards and is part of the government’s response to recommendations from the Black Economy Taskforce.