Excerpt from Public Accountant:

This new measure will take effect for payments made to workers from 1 July 2019 for income tax returns lodged for the 2020 income year onwards and is part of the government’s response to recommendations from the Black Economy Taskforce, the Australian Taxation Office (ATO) said.

‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go (PAYG) withholding obligations, the ATO clarified.

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, the ATO said. ……….

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.

“This new measure is just one of the many ways we’re tackling the black economy,” Mr Holt said, adding that when cash is used to deliberately hide income to avoid paying the correct amount of tax or superannuation it’s illegal.

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