PAYG withholding for non-cash benefits
Pay as you go (PAYG) withholding requires entities that provide non-cash benefits and those that receive them to meet their withholding obligations. The withholding provisions ensure that a similar outcome is achieved for payments made in cash or non-cash benefits.
A non-cash benefit includes property or services in any form except money.
An entity (the payer) must withhold and pay to us an amount before providing a non-cash benefit to another entity (the recipient) in the same way as if the payment was in the form of money.
However, there is no requirement to withhold if the benefit is:
- a fringe benefit
- an exempt benefit under the Fringe Benefits Tax Assessment Act 1986, or
- a benefit being the acquisition of a share or right under an employee share scheme within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936.
Nick is a building contractor who has entered into a voluntary agreement with Mike. Nick proposes to give Mike his old utility van as payment for work Mike has completed for him over a fortnight.
If the payment had been made in the form of money, Nick would be required to withhold an amount from the payment and send it to us. Under the non-cash benefit provisions, Nick is required to withhold an amount and send it to us before the benefit (the utility van) is provided to Mike.
The amount you are required to withhold and send to us, is the amount you would have been required to withhold if the payment had been in the form of money. You will need to calculate the amount according to the current market value of the non-cash benefit when the benefit is provided.
If you need help to work out the amount to withhold, refer to the PAYG withholding tax tables.
End of further information
Yes. The amount that you pay us is a debt that you may recover from the recipient. In the above example, Nick can recover the amount paid to us as a debt from Mike. Nick would be required to provide Mike with a payment summary and Mike will receive a credit for the amount that Nick has forwarded to us.
You may also offset the whole or part of the payee's debt against any amount that is, or becomes, due and payable by you to the payee. This right to offset will assist you to recover an amount owed by payees that has been paid to us.