On 20.9.18, the Government introduced the Treasury Laws Amendment (Black Economy Taskforce Measures No 2) Bill 2018 in the House of Representatives and on 17 Oct 2018, it the Lower House and moved (the next day) to the Senate.
The Bill proposes:
- to insert a new s26-105 into the ITAA 1997 that will deny an income tax deduction for a number of (labour related) payments, where there is a PAYG withholding obligation under Div 12 of the TAA, and the payer fails to withhold the PAYG amount, or fails to notify the Commissioner, of the amounts withheld, by the time the ATO was due to receive those amounts – under s16-150 of the TAA (which obliges the employer to advise even $nil withholding amounts).
- Interestingly, the deduction does not depend on the withheld amount actually making it to the Commissioner (proposed s26-105(1)b)).
- This could work harshly where an external ‘payroll agent’ failed to withhold or notify the Commissioner (as it will be the employer who loses the deduction).
- If the Payroll Agent then stole the money paid to them, the employer may get a deduction for losses caused by theft, etc (under s25-45 of the ITAA 1997 – subject to the money stolen being regarded as ‘included in [the employer’s] assessable income, as required by para (c)).
- See a related Tax Technical article about the exposure draft legislation.
- to amend s396-55 of the TAA to require entities (with ABNs) that supply ‘road freight’, ‘IT’ or ‘security, investigation or surveillance’ services, to report payments to contractors, for their related services (and there is no PAYG withholding obligation on those payments under Div 12 of the TAA).
- Section 396-55 requires these reports to be given to the ATO.
- See a related Tax Technical article about the exposure draft legislation).
These measures were previously announced in the 2018-19 Federal Budget.
DATE OF EFFECT: These changes apply from 1 July 2019.
Comprehension questions (answers available)
- Were these measures introduced as a result of the Black Economy Taskforce’s investigations?
- Would the new s25-105 deny deductions for wages, where the employer failed to withhold Div 12 PAYG amounts?
- Could an employer deduct wages it paid to employees, which were too low for there to be any PAYG withholding obligation, if their outsourced Payroll Agent overlooked advising that there was no withholding amount to pay, for that reporting period)?
- Will entities providing ‘road freight’, ‘IT’ or ‘security, investigation or surveillance’ services have to report payments to its contractors (unless they already withhold PAYG from those payments)?
- Do both these measures commence in the 2018/19 year?