Pay as you go (PAYG) withholding is a system for withholding amounts from payments you make to employees and businesses so they can meet their end-of-year tax liabilities.
You will have withholding obligations if you:
- have employees
- have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from payments you make to them, or
- make payments to businesses that do not quote their Australian business number (ABN).
If you make payments subject to withholding, you must:
- register for PAYG withholding
- withhold amounts from wages and other payments
- lodge activity statements and make payments to us
- provide payment summaries to employees and other payees
- provide us with a PAYG withholding payment summary annual report.
This guide does not explain your other tax-related obligations as an employer. For information on your:
- other tax-related obligations, refer to Employers - home
- superannuation obligations, refer to Employers superannuation - home
- fringe benefits tax (FBT), refer to Fringe benefits tax
There are a number of ways to register. You must apply for registration by the day on which you are first required to withhold an amount from a payment.
Your withholding obligations vary depending on whether your worker is an employee or a contractor. Other factors that can affect the amount you withhold include an employee's Higher Education Loan Program (HELP) or Financial Supplement debts and eligibility for tax offsets.
You need to report and pay amounts you withhold to us and to lodge your activity statements.
A payment summary shows how much you paid a worker and how much you withheld during the financial year. The payment summary you need to use and when you provide it depend on a range of factors including whether the worker was a contractor or an employee. An annual report summarises all payments and amounts withheld for the year.
When an employee or contractor stops working for you, your obligations may include making and reporting employment termination payments.
If you cease to be an employer, you should cancel your registration for PAYG withholding.