‘Cash in hand’ payments to workers no longer tax deductible
The ATO has reminded employers that legislation has been introduced that make any ‘cash in hand’ payments made to workers from 1 July 2019 specifically non 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.
Uber drivers not employees
The Fair Work Ombudsman has completed its investigation relating to Uber Australia Pty Ltd and its engagement of drivers, concluding that the relationship between Uber Australia and the drivers is not an employment relationship.
The investigation found that Uber drivers are not subject to any formal or operational obligation to perform work.
Instead, Uber drivers have control over whether, when, and for how long they perform work, on any given day or on any given week, and, in particular, Uber Australia does not require drivers to perform work at particular times.
As a consequence, the FWO will not take compliance action in relation to this matter.