ATO says: 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.
These are payments:
– of salary, wages, commissions, bonuses or allowances to an employee
– of directors’ fees
– to a religious practitioner
– under a labour hire arrangement
– for a supply either wholly or partly of services where the contractor has not provided you with their Australian business number (ABN).
If the PAYG withholding rules require you to withhold an amount from a payment you make to a worker, you must:
– withhold the amount from the payment before you pay it to them
– 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.
If you don’t comply with your PAYG withholding and reporting obligations for a payment, you may:
– lose your deduction for that payment
– face existing penalties that apply for failure to withhold and report amounts under the PAYG withholding system.
Making the decision to declare directors fees well after the end of the financial year will likely see you fall foul of these rules. You would also need to have withheld tax and applied superannuation. See our post about late super payments
ATO fine print can be found here
