From 1 July 2019, the rules for claiming deductions for payments to employees and contractors are changing. You can only claim deductions for payments made to employees and contractors where you have met the pay as you go (PAYG) withholding obligation for that payment.
So what are your obligations?
Where the PAYG withholding rules require an amount to be withheld from wages or contractor payments, you must:
withhold the amount from the payment before you pay the worker
report that amount to the ATO
With contractors, it is your responsibility to ensure that the contractor has provided a valid ABN on their invoice. If the contractor fails to provide a valid ABN and the invoice exceeds $75 excluding GST, you must withhold 47% from the payment and remit that amount to the ATO in order for your payment to the contractor to be tax deductible.
With wages paid to any employees, you won't lose your deduction if you withhold: