• PAYG withholding

    This is available to download in Portable Document Format (PDF) format: PAYG withholding (NAT 8075, 700KB).

    About this guide

    This guide will help you meet your pay as you go (PAYG) withholding obligations if you:

    • are an employer
    • operate a business that has other workers, such as contract workers, or
    • make payments to other businesses that do not quote their Australian business number (ABN).

    This guide does not cover withholding from:

    • interest, dividends or royalty payments you make to a non-resident
    • payments you make to foreign residents for
      • entertainment or sports activities
      • construction and related activities
      • arranging casino gaming junkets
       
    • interest, dividends or unit trust distributions you pay to an investor (including a non-resident) that did not provide or was deemed not to have quoted a tax file number (TFN)
    • payments that trustees of closely held trusts make to beneficiaries, or
    • departing Australia superannuation payments.

    Terms we use

    When we say:

    • contractor, we mean those workers who are self-employed and have a contract with you to provide services on their own account
    • employee, we mean those workers you employ in your business. You generally have to withhold an amount from any payments you make to them
    • labour hire worker, we mean those workers supplied by a labour hire firm
    • payee, we mean an individual or business who receives payments
    • payer, we mean an individual or business who makes payments to a payee.

    Some technical terms in this guide may be new to you. These are shown in bold when first used, and are explained in the list of definitions.

    Pay as you go (PAYG) withholding

    If you have employees or pay employees of another business, you must withhold an amount from payments you make to them. If you operate your business as a company, you also need to withhold amounts from payments to company directors, for their services, this also includes payments to other workers such as contractors.

    You must also withhold an amount from payments you make to other businesses if they don't quote their ABN to you on an invoice or other document if required.

    You report and send all amounts you have withheld under PAYG withholding - this is called 'withholding'.

    Under PAYG withholding:

    • the individual or business making the payment is called the 'payer' and the individual or business receiving the payment is called the 'payee'.
    • if you are an employer or you operate a business and you make payments subject to withholding you must
      • register for PAYG withholding
      • work out the status of your workers (if applicable)
      • become familiar with the types of payments you need to withhold from
      • work out the amount to withhold
      • report and pay withheld amounts to us
      • provide payment summaries and lodge an annual report after the end of each income year.
       
    Further Information

    If you need more information, refer to PAYG withholding - what you need to know (NAT 5195).

    End of further information

    Other employer obligations

    Super guarantee

    Under super law, you must pay super contributions to the correct super fund by the cut-off dates for all your eligible employees. You may also have to offer a choice of super fund to your eligible employees including individual contractors.

    You must pass on your employees' tax file numbers (TFN), provided in their Tax file number declaration (NAT 3092), to their super funds.

    Further Information

    If you need more information about your superannuation obligations:

    End of further information

    Fringe benefits

    If you provide a fringe benefit to an employee or their associate, such as their family member, you may be liable for fringe benefits tax (FBT). Basically, a fringe benefit is a benefit provided to an employee (or their associate). Benefits include rights, privileges or services. For example, you provide a fringe benefit when you allow an employee to use a work car for private purposes or pay an employee's private health insurance costs.

    Further Information

    If you need more information on fringe benefits tax, refer to Fringe benefits tax - what you need to know (NAT 1744).

    End of further information

    Payroll tax

    All Australian States and Territories have a payroll tax, which is calculated on wages paid or payable by employers. For payroll tax purposes wages includes salaries, allowances, director's fees, superannuation and the 'grossed-up' value of fringe benefits.

    Employers are required to self-assess their liability on a monthly basis, with an annual adjustment reconciliation performed at the end of the financial year.

    To see if you are liable for payroll tax you should check your local Revenue Office website to see if you need to register.

    The Australian Taxation Office (ATO) and the State and Territory Revenue Offices exchange wage-related and other information to assist in the proper identification and accurate assessment of taxation liabilities.

    For more information about payroll tax contact the Revenue Office where you employ:

    Australian Capital Territory

    02 6207 0088

    www.revenue.act.gov.au

    New South Wales

    1300 139 815

    www.osr.nsw.gov.au

    Northern Territory

    1300 305 353

    www.revenue.nt.gov.au

    Queensland

    1300 300 734

    www.osr.qld.gov.au

    South Australia

    08 8204 9880

    www.revenuesa.sa.gov.au

    Tasmania

    03 6233 2813

    www.sro.tas.gov.au

    Victoria

    13 21 61

    www.sro.vic.gov.au

    Western Australia

    1300 368 364

    www.finance.wa.gov.au

    PAYG withholding - what you need to do

    If you have employees or other workers, or you make payments to other businesses that don't quote their ABN to you, you must:

    1. Register for PAYG withholding
    2. Work out the status of your workers (if applicable)
    3. Work out which payments to withhold from
    4. Work out the amount to withhold
    5. Report and pay withheld amounts
    6. Provide payment summaries and lodge an annual report
    7. Keep proper records
    • Last modified: 21 Aug 2012QC 16838