PAYG for businesses.


1st February, 2018

What you need to know about PAYG for business

What you need to know about PAYG in the time that it takes to call your mum.

Before Mum’s had time to catch you up on the grandkids’ school play and Uncle Gerald’s hip replacement, we’ll take you through what you need to know about PAYG for businesses.

That’s about five minutes reading time.

Through your own employment history, you’re probably already familiar with Pay As You Go (PAYG) tax instalments for individual income tax, where you pay your tax in small instalments throughout the year.

As a small business owner, you have the additional responsibility of helping employees meet their PAYG obligations through PAYG Withholding.

We know this stuff can seem like information overload, so we’ll try to keep it as simple as possible. Here’s what you need to know about PAYG, as well as some helpful tips for keeping on top of it all.

What is PAYG Withholding?

Put simply, PAYG Withholding is a way for employers to collect income tax payments from their employees. The simplest way to do this is by taking out the tax from your employees’ wages.

You may be responsible for collecting PAYG Withholding amounts from wages you pay to:

  • Your employees
  • Other workers, such as contractors, that you have voluntary agreements with
  • Businesses that don’t quote their Australian Business Number (ABN)

How to register for PAYG Withholding

Before you are required to collect PAYG Withholding amounts, you must first register for PAYG withholding.

Registering for PAYG Withholding is easy and can be done online on the Australian Business Register. You can also apply for an ABN, register for GST and an AUSkey at the same time on the same form.

You can also register for PAYG Withholding through your accountant or over the phone.

Annual reporting

As an employer with PAYG Withholding responsibilities, you must submit a PAYG Withholding annual report at the end of each financial year.

It must include:

  • All payments you made to payees during the financial year, and
  • The amounts you withheld from those payments.

You must report any withheld amounts in the PAYG tax withheld section of your business activity statement (BAS) and pay all withheld amounts to the ATO.

Group Certificates and Payment Summaries

At the end of Financial Year, every employer must provide a payment summary to each of their employees. You must do this before 14 July every year.

Every payment summary must state the total amount of payments made to that employee over the course of the financial year.

It must also include any deductions you made for income tax, Medicare levy, Superannuation, RESC (salary sacrifice Superannuation) grossed-up Fringe Benefits and HELP payments. You must report these details to the ATO by 14 August every year.

Tips for managing PAYG

One of the biggest mistakes employers make when it comes to PAYG is not planning for it. Set aside your PAYG obligations throughout the year so you’re not caught out at tax time.

Even better, set up a separate bank account where you store your employees’ PAYG contributions. Deposit PAYG withholding payments in this account every time you pay your employees.

To make it even easier, you can even put your GST withholding amounts in this account. That way, all your tax payments are in one place.

READ: Top 10 common GST mistakes in BAS reports you’re probably making

MYOB accounting tools can automatically manage your PAYG. This allows you to spend more time on your business and less time worrying whether you calculated PAYG correctly.

Find the right MYOB solution for your business here.

You can also find more tips on managing your PAYG processes here.

Top 3 takeaways

  1. As an employer, you are responsible for collecting PAYG contributions on behalf of your employees.
  2. You must submit an annual report to the ATO detailing your employees’ payment summaries and PAYG contributions.
  3. Plan for PAYG and put contributions aside regularly so you’re not caught out at tax time.

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