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  • PAYG withholding gap

    The pay as you go (PAYG) withholding gap is an estimate of the difference between amounts that should have been withheld by employers from salary and wages paid to their employees according to the law, and the total amounts reported and remitted to us.

    Under the Taxation Administration Act 1953, employers have an obligation to collect tax from payments made to employees and remit that tax to the ATO. Employers must register with us under the PAYG withholding scheme to do this.

    PAYG withholding provides an effective way for most people to meet their annual income tax obligations. The withholding system also ensures we collect a more stable, secure source of revenue throughout the year. This revenue supports a range of community services.

    Key facts on PAYG withholding for the 2016–17 financial year include:

    • We had around 835,000 employers in Australia.
    • Employers paid $178 billion PAYG withholding to the ATO.
    • Employers paid about 97% of PAYG withholding voluntarily, without intervention from us.

    Estimate of the gap

    For 2016–17 we estimate a net PAYG withholding gap of 1.7% or $3 billion. In other words we estimate that 98.3% of the total theoretical value was collected.

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      Last modified: 17 Oct 2019QC 57198