PAYG withholding: A simple guide for businesses
What is PAYG withholding?
PAYG (pay as you go) withholding is an employer obligation in Australia to help payees meet their end of year tax liabilities. This means employers withhold a certain percentage of each employee’s pay to help them satisfy their annual tax obligations.
Who has to apply?
You must register for PAYG withholding before you’re first required to make a payment that is subject to withholding. Payments to employees, contractors or companies that haven’t quoted their Australian Business Number (ABN) are all subject to PAYG withholding.
Registering for PAYG
If you have an ABN and a myGovID, you can register for PAYG withholding through the ATO’s online service portal. If you don’t have an ABN, you can register by phone or by filling out an Application to register a PAYG withholding account (form NAT 3377). You may also contact your BAS agent or registered tax agent for assistance.
How much do I need to withhold?
The ATO offers online tax tables and tax calculators to help you calculate PAYG withholding for different scenarios.
When do I need to pay and report PAYG withholdings?
The ATO has different requirements for paying and reporting withheld amounts, depending on the total of your withholding:
Small withholders (withholds $25,000 or less annually)
Pay and report quarterly.
Medium withholders (withholds $25,001-$1 million annually)
Pay and report monthly.
Large withholders (withheld more than $1 million in the previous financial year)
Pay and report twice weekly. In some instances, the ATO may allow large withholders to use a GST credit to offset the PAYG liability.
Annual payment summaries
Employers that aren’t using Single-Touch Payroll (STP) must give employees annual payment summaries/income statements. If employers are using STP, employees can access their own income statements through their myGov account.
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