If your organisation has employees, you must withhold amounts from their pay and send the withheld amounts to us. This process is called withholding and is done through the pay as you go (PAYG) withholding system.
You must register your organisation with us when you are required to withhold from payments to your employees.
The amount to be withheld from an employee's pay depends on the amount they are paid and the information an employee has provided in either or both of the following:
We publish tax tables that list the amounts to withhold from weekly, fortnightly and monthly pays.
If your organisation is a small organisation, you report and pay the withheld amounts to us quarterly when you lodge your organisation's activity statements.
You must also:
- give each employee an annual payment summary of the amount withheld from them during the year
- provide an annual report to us about withheld amounts.
Directors are treated similarly to employees for PAYG withholding purposes.
What are your organisation's obligations for other PAYG withholding payments?
The most common circumstances that could arise where an organisation may have PAYG withholding obligations other than for employees would be:
- payments under PAYG voluntary agreements
- payments where no Australian Business Number (ABN) is quoted on an invoice.
The rates of withholding depend on the type of payment. For example, the 'no ABN quoted' withholding rate is currently 46.5% (the top marginal rate plus the Medicare levy) while the rate to be used for a PAYG voluntary agreement is either a flat rate of 20%, or the payee's PAYG instalment rate.
You should check with us what rates apply to other payments.
A payment summary must also be issued to individuals and entities (who are not employees) showing amounts that have been withheld under other types of PAYG withholding.
Are any organisations exempt from PAYG withholding?
No. Withholding obligations are determined by the nature of the payments. Organisations that are exempt from income tax are not exempt from PAYG withholding obligations.
Registering for PAYG withholding
If your organisation pays salaries or wages, or makes any other payments that are subject to PAYG withholding, your organisation will need to register.
Your organisation can register for PAYG withholding by either completing an electronic or printed form, or by contacting us.
If you are applying for an ABN for your organisation, you can use the same form to register for PAYG withholding.
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To register for PAYG withholding:
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If your organisation makes a payment that is subject to PAYG withholding, you must withhold the required amount from the payment and send this to us by the due date. The amount withheld will be reported on your organisation's activity statement along with any goods and services tax (GST), PAYG instalments or FBT amounts. Any credits your organisation is entitled to (such as GST credits) will be offset against any amount of PAYG withholding and other tax liabilities you must report on your organisation's activity statement.
You send these amounts to us quarterly or monthly, depending on your organisation's withholding status - small or medium withholder. If your organisation is a large withholder, you have to send amounts more frequently.
At the end of the year you must submit an annual report to us that reconciles all withholding payments your organisation has made to us during the financial year.
Last Modified: Thursday, 30 June 2011