Calculating the PAYG withholding gap
To estimate the PAYG withholding gap, we:
- Determine the PAYG withholding accrual figures from ATO systems data, excluding non-resident dividends, interest and royalty withholding tax amounts.
- Subtract other non-salary and wage withholding amounts. These include personal services income for sole traders, tax withheld where an Australian business number (ABN) is not quoted, voluntary agreements, benefits and pensions.
- Subtract this amount from the theoretical PAYG withholding liability to estimate the withholding gap.
ATO salary and wages values are those from tax returns, though we make adjustments to include other items in the ABS series where possible. For fringe benefits value, we use the ABS payments in kind series from 2007–08. Fringe benefit data before 2007–08 has been derived using the year-on-year growth in the value of reportable fringe benefits from the tax returns.