Withholding in business transactions
If a business or organisation supplies you with goods or services, it should quote its Australian business number (ABN) to you. Most quote their ABN on their invoice, and you need to keep this invoice in your business records. They can also quote their ABN to you on another document as long as it relates to the supply they are making.
If they don't quote their ABN, you must generally withhold 49% from their payment you make to them and send the withheld amount to us.
Your organisation should not withhold if any of the following applies:
- The total payment to the supplier is $75 or less, excluding any goods and services tax (GST).
- The supplier is an individual under 18 years old, is not your employee, and the payments you make to that person do not exceed $350 per week.
- The supply is wholly input taxed under GST – this includes most financial supplies, supplies of residential rent, residential premises and some precious metals, and food supplies by school tuckshops and canteens that have chosen to be input taxed – contact us if you are not sure whether a supply is input taxed.
Also, your organisation should not withhold if it is satisfied that any of the following applies:
- The supply is made in the supplier’s private capacity or as their hobby.
- The payment is exempt income for the supplier – for example, the supplier is an endorsed charity.
- The payment is to a non-resident who is not carrying on an enterprise in Australia or through an agent in Australia.
- The supplier is not an enterprise because they have no reasonable expectation of profit or gain.
If you are unsure, ask the supplier to give your organisation a written statement that the supply is excluded for one of these reasons. Your organisation must keep this statement for five years.
Statement by a supplier not quoting an ABN
Withholding from a payment
Before your organisation withholds from a payment, it needs to make sure it is registered for pay as you go (PAYG) withholding. If your organisation is withholding from employee wages, it should already be registered for PAYG withholding. It may have done this when it applied for an ABN. If it did not, it can register for PAYG withholding at any time.
If you are not registered for PAYG, phone us on 13 28 66.
If a supplier does not quote their ABN to your organisation and you are not satisfied that one of the exclusions applies, your organisation must withhold 49% of the total payment. Your organisation should also withhold if it doubts that the ABN quoted is correct. If you are unsure, you can check the validity of a supplier’s ABN by using the Australian Business Register (ABR).
To check an ABN using the Australian Business Register:
If a supplier does not have an ABN you could offer to delay payment until the supplier has obtained and quoted their ABN. Delaying the payment is a matter for you and your supplier to work out.
You must not make full payment to the supplier on the understanding that an ABN will be quoted later. If you do, you may be subject to penalties for the amount you did not withhold.
You need to add together any amounts your organisation has withheld for PAYG withholding purposes and send the total to us with your organisation’s next activity statement.
If your organisation withholds from a payment for not quoting an ABN, complete a PAYG payment summary – withholding where ABN not quoted and give it to the supplier at the same time as your organisation pays them the net amount (or as soon as possible afterwards). The supplier will need this payment summary to claim the withheld amount as a credit when they lodge their income tax return.
To register for PAYG withholding, complete one of the following forms:
Quote your ABN on your business stationery
It is a good idea to quote your organisation’s ABN on its invoices and other stationery to avoid having amounts withheld from payments for supplies your organisation has made. If your organisation is registered for GST, other organisations will also need your organisation’s ABN on tax invoices you provide them so they can claim GST credits for the GST included in the price of goods and services your organisation supplied.
Any business or organisation carrying on an enterprise should quote their Australian business number (ABN) when supplying goods or services to another enterprise. If the supplier does not quote their ABN, the general rule is that the payer must withhold 49% from their payment and send the withheld amount to us.