oaThe answer is “yes” and “no”. This little flow chart, demonstrates the process. It is simple; if donations are voluntary and passed on to the employee or a contractor, tips are not deemed as a taxable income to the business. You are not required to report the tip in your BAS Statement or Income Tax Return. It’s as easy as that.
Many people ask: “So how can tips be involuntary?” It is when a venue specifies e.g. 5% as a tip on the bill and charge it. The intention is to pass it on to the employees. I have seen it happening so many times.
Please note; that if a contractor does not provide an ABN, then 49% of the tip, must be withheld. You do not need to deduct PAYG on tips to employees.
