Deducting PAYG tax for independant contractors when reporting via STP2

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(Dynamo)Dynamo

23 Jan 2025

Dear Community

The business I work for prefers to pay independent, ABN, based contractors , out of the payroll system rather than accounts payable, I always insist that in those circumstances, the contractor complete a voluntary agreement, and I deduct the subsequent 20% tax. My argument for this has always been that if they are being paid via the payroll system with, (formerly) the generation of a payment summary, (now) direct pay day reporting via STP, we are legally obligated to deduct the flat 20% (unless advised by the ATO of their individual rate). Is that correct

Many thanks as always,

Chris

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PayrollDeanne

(Taxicorn)Taxicorn

23 Jan 2025

Hiya again, @ChrisPyne 👋

Yes, you absolutely can voluntarily include those with a voluntary agreement on your payroll in the STP pay event using income type VOL. Remember that you can only report very limited Payment Types (read the text AND the table) for this income type, as it is business and personal services income.

Always happy to assist with any payroll matters, Chris 🤓

Deanne