PAYG Withholding

Under the Pay As You Go (PAYG) Withholding rules, you are obligated to collect tax from payments you make to employees and some businesses so they are able to meet their year-end tax liabilities. An entity will have withholding obligations if:

  • You have employees
  • You have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from your payments to them
  • You make payments to businesses that do not quote their Australian Business Number (ABN)

If you are an employer and withholding amounts from payments, you need to:

  • Register for PAYG Withholding
  • Withhold amounts from payments you make to your workers and other businesses
  • Report the amounts withheld by lodging your activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
  • Provide employees with a payment summary specifying how much you paid them in the financial year, and how much you withheld from the payments
  • Provide the ATO with an annual report once each income year has ended

When an employee ceases employment with you, you must:

  • Make any final PAYG Withholding payments
  • Complete an employment termination payment (ETP) form if required
  • Send employment summary to the employee by 14 July or earlier if necessary
  • Retain the employees TFN Declaration until the end of the next financial year
  • Include the details of any final payments to the employee in your PAYG Payment Summary Statement
  • Keep the necessary PAYG Withholding Records