You can only claim deductions for payments you make to your workers (employees or contractors) from 1 July 2019 where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.

If the PAYG withholding rules require you to withhold an amount from a payment you make to a worker, you must:

 

1. withhold the amount from the payment before you pay it to them

2. report the amount to us.

 

Any payments you make to a worker where you haven't withheld or reported the PAYG amounts are called non-compliant payments. You won't be able to claim a deduction if you are required to withhold an amount and you don't withhold or report any amount to us, unless you voluntarily tell us before we advise that we have commenced an audit or other compliance activity. How you voluntarily tell us will depend on whether you failed to withhold or report.

 

If you make a mistake and withhold or report an incorrect amount, you won't lose your deduction. You still need to correct your mistake as soon as possible to minimise penalties.

 

Source: ATO