Failure to withhold
Where your business has already lodged some of its activity statements and has not been withholding as required, you need to correct this mistake by lodging a revised activity statement. You can't simply correct the withholding understatement on a future activity statement.
Your business must use the legislative method to work out the amount to withhold when revising an activity statement.
You can't use the simplified methods (that is, the 70% of income method and the net PSI percentage from the previous year) for a PAYG payment period that has ended.
However, for later PAYG payment periods you can choose to use one of these methods.
Betty started her business as a management consultant who contracts her personal services through her private company, Betty Pty Ltd, in August. As a small withholder, the company reports and pays PAYG withholding quarterly.
The company did not realise it had additional PAYG withholding obligations until early December. It had already lodged its September activity statement without reporting its additional PAYG withholding obligations.
The company must lodge a revised activity statement for the September quarter to correct the withholding understatement. It cannot correct the mistake in a later activity statement during the following income year.
End of example