---
title: No tax deductions if you don’t meet your tax obligations
description: No tax deductions if you don’t meet your tax obligations
---

[Insights and Updates ](https://www.hayesknight.com.au/insights-and-updates)

# [No tax deductions if you don’t meet your tax obligations](https://www.hayesknight.com.au/insights-and-updates/no-tax-deductions-if-you-dont-meet-your-tax-obligations)

 Written by [Stephen Maze](https://www.hayesknight.com.au/insights-and-updates/author/stephen-maze) | Jan 6, 2019 10:00:25 PM

### New laws passed by parliament directly target the behaviour of taxpayers that don’t meet their obligations.

### Tax deductions denied

If taxpayers  
do not meet their PAYG withholding tax obligations, from 1 July 2019 they will  
not be able to claim a tax deduction for payments:

- of salary, wages, commissions,  
  bonuses or allowances to an employee;
- of directors’ fees;
- to a religious practitioner;
- under a labour hire arrangement; or
- made for services where the supplier  
  does not provide their ABN.

The main exception  
is where you realised there is a mistake and voluntarily corrected it. For  
example, if you made payments to a contractor but then later realised that they  
should have been paid as an employee and no PAYG was withheld. In these  
circumstances, a deduction may still be available if you voluntarily correct  
the problem but penalties may still apply for the failure to withhold the  
correct amount of tax.

### Are you in the road freight, IT or security, investigation or surveillance business?

The Taxable  
Payments Reporting system was introduced to stem the flow of cash payments to  
contractors and rampant under reporting of income. Since the building and  
construction industry was first targeted in 2012, the reporting system has  
expanded to include cleaning and courier services. Now, a broader set of  
industries have been targeted.

If you have  
an ABN, and are in road freight, IT or security, investigation or surveillance,  
then any payments you make to contractors will need to be reported to the  
Australian Tax Office (ATO).

**Be careful here as the definition of these  
industries is very broad.** For  example, ‘investigation or  
surveillance’ includes locksmiths. The definition covers services that provide  
“protection from, or measures taken against, injury, damage, espionage, theft,  
infiltration, sabotage or the like.”

IT services  
are the provision of “expertise in relation to computer hardware or software to  
meet the needs of a client.” This includes software installation, web design,  
computer facilities management, software simulation and testing. It does not  
include the sale of software or lease of hardware.

Road  
freight is typically goods transported in bulk using large vehicles. This  
includes services such as log haulage, road freight forwarding, taxi trucks,  
furniture removal, and road vehicle towing. The addition of road freight to the  
taxable payments reporting system completes the coverage of delivery and  
logistics services as businesses in courier services are already obliged to  
report payments to contractors to the ATO.

If your  
business is impacted by these changes, you need to document the ABN, name and  
address, and gross amount paid to contractors from 1 July 2019. Your first  
report to the ATO, the Taxable Payments Annual Report (TPAR), is due by 28  
August 2020. This might seem like a long way away but it will come around  
quickly and you need to ensure that your systems are in place to manage the  
reporting required easily and accurately.

### Who needs to report?

The  
obligation to report contractor payments to the ATO is already quite broad. The  
addition of road freight, IT or security, or investigation or surveillance  
services, adds another layer.

| **Service** | **Reporting of contractor payments** |
| --- | --- |
| Building and construction services | From 1 July 2012 |
| Cleaning services | From 1 July 2018 |
| Courier services | From 1 July 2018 |
| Road freight, IT or security, or investigation or surveillance services | From 1 July 2019 |

For businesses providing mixed services, if 10% or more of your GST turnover is made up of affected services, then you will need to report the contractor payments to the ATO.

**Need assistance? Give **[**Craig Rosen**](https://www.hayesknight.com.au/team/craig-rosen/)** a call on +61 2 9221 6666.**

[View full post](https://www.hayesknight.com.au/insights-and-updates/no-tax-deductions-if-you-dont-meet-your-tax-obligations)

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