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  • Report and pay PAYG withholding

    Once you have registered your business for PAYG withholding we will send you an activity statement showing when the withholding payment is due. You need to pay withheld amounts to us, report the amounts on your activity statements and lodge an annual report.

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    Completing your business tax return

    Your business can't claim a deduction in its income tax return for the amount of tax it paid as additional PAYG withholding. The amount of tax your business withholds under this obligation is credited to each individual's tax return who produced the PSI.

    Payment summaries

    Your business is required to give a payment summary to each individual the income was attributed to by 14 July following the end of the income year. Each individual receives credits in their individual tax return for the amounts that your business withheld.

    You will need to include any:

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    Salary or wages in the following income year

    If your business makes payments of salary or wages between 1 and 14 July (after the end of the income year) and is affected by the PSI rules then, for the purpose of the PSI rules, the payments are treated as having been received on 30 June of the previous income year.

    These payments must be included in your:

    • business' activity statement covering the month of July
    • payment summary for the previous income year
    • business' annual PAYG report for the previous year.

    Payments to associates for non-principal work

    Your business can't claim a deduction for salary or wages paid to an associate employee for performing non-principal work. The salary or wages are not included in the associate's assessable income. Instead, these amounts are included in the attributed income of the individual who produced the PSI.

    However, you can include amounts withheld from the associate's salary in the PSI payment summary of the individual generating the PSI as additional PAYG withholding amounts if:

    • your business withheld amounts from salary or wages paid to an associate for non-principal work and
    • you have not yet issued the payment summaries for the principal worker and the associate.

    The associate must not receive a payment summary for salary or wages paid for non-principal work out of the attributed PSI.

    If you have already issued payment summaries to the principal worker and the associate, then either:

    • your business can issue an amendment payment summary in a letter to each person, with a copy for them to send to us when lodging their tax returns, or
    • the associate can lodge their income tax return showing no income from your business under salary or wages, but claim a credit for the amount of tax withheld – they must include additional information with their tax return explaining their circumstances.

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      Last modified: 30 Mar 2017QC 17515