This is available to download in PDF format: PAYG withholding (NAT 8075, 430KB).
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- make payments to other businesses that do not quote their Australian business number (ABN).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 to have quoted a tax file number, or
- departing Australia superannuation payments.
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For more information about withholding from these types of payments, refer to:
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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.
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 must also withhold amounts from payments you make to your company directors for their services. You may also have to withhold from payments you make 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 to us using the PAYG withholding system - this is called 'withholding'.
Under the PAYG withholding system, the individual or business making the payment is called the 'payer' and the individual or business receiving the payment is called the 'payee'.
Under the PAYG withholding system, 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.
Other employer obligations
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.
You must pass on your employees' tax file numbers (TFN), provided in their Tax file number declaration (NAT 3092), to their super funds.
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) because that person is an employee. 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.
Using the PAYG withholding system
If you have employees or other workers, or you make payments to other businesses that don't quote their ABN to you, you must:
- Register for PAYG withholding
- Work out the status of your workers (if applicable)
- Work out which payments to withhold from
- Work out the amount to withhold
- Report and pay withheld amounts
- Provide payment summaries and lodge an annual report
- Keep proper records
Last Modified: Friday, 23 October 2009
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