Pay as you go (PAYG) withholding is a system for withholding amounts from payments to employees, other individuals and businesses. An entity will have withholding obligations if the entity:
- Has employees, including company directors and officeholders
- Has other workers such as contractors, and voluntarily agrees to withhold tax from payments to them
- Makes payments to other businesses, if they don’t quote an Australian business number (ABN) to the entity
- Makes certain other payments that are subject to withholding.
If you are an employer or run a business and withhold amounts from payments, you need to:
- Register for PAYG withholding
- Register as an employer of working holiday makers (417 or 462 visa’s) if applicable.
- Withhold amounts from wages and other payments
- Lodge activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
- Provide payment summaries to employees and other payees
- Provide the ATO with an annual report once each income year has ended.
Payment summaries and annual reports are not required in relation to amounts reported using single touch payroll.