Religious institutions guide to PAYG withholding

The pay as you go (PAYG) withholding system requires payers to withhold an amount from certain payments made to a religious practitioner. This occurs where the:

• activity, or a series of activities, is performed by the religious practitioner in pursuit of his or her vocation as a religious practitioner, and
• activity, or series of activities, is performed by the religious practitioner as a member of a religious institution, and
• payment is made by the entity in the course or furtherance of an enterprise that the entity carries on.

What is a religious institution?

For the purposes of PAYG withholding, a religious institution is:

• a body whose objects and activities reflect its character as a body instituted for the promotion of some religious object, and
• the beliefs and practices of the members of that body constitute a religion.

Generally, private schools, private universities and residential colleges will not be considered religious institutions. However, Bible colleges, seminaries and theological colleges may come within the definition of a 'religious institution'.

For information about exemptions for religious institutions, refer to Taxation Ruling TR 92/17 - Income tax and fringe benefits tax: exemptions for 'religious institutions'.