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, or
- 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
- Report to the ATO (generally using single touch payroll (STP))
- Lodge activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
- For amounts not reported using STP, provide payment summaries to employees and other payees, and
- For amounts not reported using STP, provide the ATO with an annual report once each income year has ended