‘Cash in hand’ payments to workers no longer tax deductible

The ATO has 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.

In addition to the loss of a tax deduction, employers caught not complying with their PAYG withholding obligations may be penalised for failing to withhold and report amounts under the PAYG withholding system. However, employers who mistakenly classify their employee as a contractor will not lose their deduction where their worker provides them with an ABN.

Should you have doubt on the definition of ‘cash in hand’, head to our office at Verus Accountants and Advisors or call us today to find out more. The penalty is not worth the ignorant risk. Call us now!