Work out any additional PAYG withholding amounts
Your business needs to work out the amount of additional PAYG withholding for each business activity statement (BAS) for the attributed income only. Salary or wages promptly paid to the individual who produced the PSI is done separately.
It can sometimes be difficult for businesses to accurately work out the attributed income amount each time their BAS is due. So, we have introduced simplified ways to work out the attributed income amount for additional PAYG withholding you must report and pay.
Instead of working out the additional PAYG withholding on the actual amount attributed to each individual who performed the services, your business can use a simplified method. Under the simplified methods your business can work out the additional PAYG withholding based on:
- 70% of the gross PSI received in the PAYG payment period (70% of PSI received method)
- a percentage of the net PSI from the previous income year (percentage based on the previous income year method).
If your business would prefer to work out the actual amount of PSI it will attribute for the BAS period and base the additional PAYG withholding on this actual attributed income amount, your business can still use this method. We refer to this method as the ‘legislative approach’ method.
Step 1: Select a method and work out the attributed income for the additional PAYG withholding.
Select a method to work out the attributed income using one of the following three methods:
Next, work out the attributed income amount which the additional PAYG withholding will be based on.
Step 2: Work out how much to withhold on the attributed amount.
After you've worked out the attributed income amount from step 1, you'll need to work out the additional withholding amount to report and pay. You work out this withholding amount using the individual withholding rates. You can do this using either:
If you use the PAYG withholding tables, use the:
- table with the correct frequency of payment (this is generally quarterly for small businesses)
- correct column in the tables.
The legislative approach method allows you to more closely match your PAYG withholding obligations with your current PSI and expenses. However, you may be penalised if your calculations are incorrect.
If you correctly use either of the two simplified methods, you are not penalised.
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Claire is a computer programmer who operates through her company Claire's Computer Programming Services Pty Ltd. In the first quarter (1 July to 30 September), Claire (on behalf of the company) completed three contracts which generated $100,000 PSI. The company did not earn any other income.
The company has worked out the PSI rules apply to the PSI and the company is registered for PAYG withholding.
For the $100,000 PSI, Claire's Computer Programming Services Pty Ltd has:
- promptly paid $30,000 to Claire as salary or wages
- incurred $10,000 in allowable deductions (other than entity maintenance deductions)
- attributed $60,000 ($100,000 - $30,000- $10,000) to Claire, as she was the individual who produced the PSI.
Claire's Computer Programming Services would have:
- additional PAYG withholding obligations for the $60,000 attributed to Claire
- normal PAYG withholding obligations for the $30,000 salary or wages promptly paid to Claire
- to give Clare PAYG payment summaries for the salary or wages and for the attributed PSI at the end of the financial year.
For the additional PAYG obligations, Claire's Computer Programming Services must:
End of example
- work out the amount of PAYG withholding for the income attributed to Claire
- report and pay the additional PAYG withholding amounts through the company's activity statement for the first quarter
- give Claire an annual PAYG payment summary at the end of the financial year
- send us an annual report showing additional PAYG withholding at the end of the financial year.