PAYG withholding

Which payments to withhold from

The most common payments you need to withhold amounts from are payments you make to:

• your employees
• your directors
• businesses that do not quote their ABN to you.

Depending on your circumstances, you may also have to withhold amounts from payments you make to:

• contractors who have a voluntary agreement with you
• individuals under a labour hire arrangement
• employees on termination of their employment.

If you operate your business as a company or trust with a corporate trustee, it is likely you are either an employee or director of that business. If the company or corporate trustee pays you a wage or directors fees, it has the same responsibility to withhold amounts from these payments and send the withheld amounts to us.

If you operate your business as a sole trader or a partnership and you draw amounts from the business, this is not a wage and you do not have to withhold from these drawings. You make some provision for your income tax liability through PAYG instalments. However, if you have other employees, you must withhold amounts from payments you make to them under PAYG withholding.

If you need more information on PAYG instalments, refer to Introduction to pay as you go income tax instalments (NAT 4637).

Allowances

Allowances are separate payments you make to employees, company directors or labour hire contractors for:

• working conditions (for example, danger, dirt, height, shift or travelling time)
• qualifications or special duties (for example, trade, first aid certificate or safety officer)
• expenses they can't claim as a tax deduction (for example, normal travel between home and work)
• work-related expenses they may be able to claim as a tax deduction (for example, tools, compulsory uniform, and dry cleaning).

If you need more information about withholding amounts from allowances paid to: employees or company directors, refer to Withholding from allowances (NAT 5448) labour hire contractors, refer to Taxing of allowances and reimbursements paid to workers under a labour hire arrangement (NAT 5151).