This guide explains your pay as you go (PAYG) withholding obligations if you make payments to employees following appointment to any of the following roles:
- receiver and manager
- voluntary administrator appointed under the Corporations Act 2001
- administrator of a deed of company arrangement
- trustee of a bankrupt estate.
PAYG withholding will also apply to payments you make:
- to current or former employees of an entity under external administration
- to former employees of a bankrupt estate
- to a supplier who has not quoted an Australian Business Number (ABN).
You may need to apply for a separate Australian Business Number (ABN) for a business under administration or bankrupt estate.
If the entity under external administration does not have an ABN, you will need to apply for a separate ABN. If the entity has an ABN, you may use this ABN after arranging for a separate branch number to be attached to the entity's ABN.
You need to apply for a separate ABN (where the estate is entitled to an ABN) for each estate where you act as trustee.
You must register for pay as you go (PAYG) withholding if you need to withhold tax from payments to workers and other businesses.
Work out the amount to withhold
You are required to withhold amounts from payments you make to:
- current or former employees of an entity under external administration
- former employees of a bankrupt estate.
To work out how much to withhold from payments you make to employees:
- use the information the employees have given you on their Tax file number declaration and, if applicable, Withholding declaration
- refer to Table 1: PAYG withholding and reporting for payments made by administrators and trustees.
If you don't have a copy of a Tax file number declaration for an employee, they must complete a new one. You will need to complete the 'payer' section and send the original of the completed declaration to us within 14 days. You must also keep a copy for your records.
If a previous employee of the entity in administration or bankruptcy gives you a Withholding declaration to claim a tax offset, or to advise you of changes to their residency status and tax-free threshold, you are not required to send it to us. However, you must keep the completed Withholding declaration with your records for five years.
Type of payment
Applicable tax table or withholding rate
Relevant payment summary
Current salary or wage payments made to employees, including payments for leave paid when the leave is taken, for the period after the date on which the administrator or trustee was appointed.
Back payment of wages, including unpaid amounts of leave already taken (and including underpayment of wages over any period) that accrued before the date on which the administrator or trustee was appointed.
Back payments of wages, including unpaid amounts of leave already taken (and including underpayment of wages over any period) that accrued after the date on which the administrator or trustee was appointed.
Unused annual leave and long service leave.
A genuine redundancy payment or early retirement scheme payment which is within the tax-free limit, which includes a:
Withhold Nil 1
Part of a genuine redundancy payment or an early retirement scheme payment that exceeds the tax-free limit.
Long service leave.
Payment for a supply where no ABN is quoted (this does not include dividend payments made to employees).
Withhold at 47%
- The tax free amount of a genuine redundancy includes only those amounts which exceed the amount that the individual would have been paid upon a normal termination. It may or may not include amounts for payment in lieu of notice. Unused leave cannot be tax free. For the tax-free threshold for the year in which the payment is made, refer to the Tax table for employment termination payments (ETP).
- An ETP includes the part of a genuine redundancy payment or early retirement scheme payment that exceeds the tax-free threshold.
- A back payment which accrued within 12 months of the date of payment should be included in 'Gross payments' on the payee's payment summary.
A back payment which accrued more than 12 months before the date of payment, which is $1,200 or more, should be shown at 'Lump sum payments' label E. If the amount is less than $1,200 then include it in 'Gross payments' on the payee's payment summary.
An employee may apply to us for a reduction in the amount to be withheld from their payments. We will approve individual variations when the standard rate of withholding will be too high for that person's final tax liability. If we grant a variation we will send you a notice telling you what is required.
There may also be situations where a group of employees with the same circumstances need to obtain a variation to the rate of withholding. In these cases, you may apply for a class variation for these employees.
Suppliers quoting ABNs when dividends are paid
If you make a payment representing a dividend to a recipient who is a creditor (other than an employee), you must withhold 47% from the payment if it relates to a supply and the recipient fails to quote their ABN. This also applies to any ongoing business transactions made by the trustee.
Employees with a debt to the employer and an amount offset before payment
Laws dealing with insolvency and bankruptcy require that certain debts are offset before the claim being made by the creditor. By law, the employee is permitted to claim only the net amount (if any) of wages that remain after taking into account amounts the employee owes the employer. You should calculate the amount to withhold based on this net amount, that is, after any offset has occurred.
If you have withheld tax amounts from payments you make to your payees, you need to pay and report the amounts to us and meet other reporting requirements.
Complete payment summaries
You have to give each of your payees a payment summary showing how much you paid them for the financial year and how much you withheld from the payments.
You may have to complete various types of payment summaries depending on the types of payments you've made throughout the financial year.
At the end of each financial year you must lodge a PAYG withholding annual report.
You must keep all records that explain your PAYG withholding transactions for at least five years.
Records must be in English or in a format that can be converted into English.
If your records are not in writing (for example, you keep them in an electronic format on a computer), they must be in a format that is readily accessible.
You may choose to store electronic images of your business paper records, as long as the electronic copies:
- are a true and clear reproduction of the original paper records
- can be retrieved and read by us at any time.
You do not have to keep original paper records once you have stored an electronic copy of them.
The PAYG withholding records you must keep include:
- wages records, including payment records
- employment declarations (for employees working for you before 1 July 2000), tax file number declarations and withholding declarations
- copies of payment summaries and payment summary statements, or electronic annual reports
- employment termination payment records (or eligible termination payment records)
- records of Personal Services Income (PSI) you have attributed
- voluntary agreements
- statements by a supplier where no ABN was quoted
- records of amounts you withheld where no ABN was quoted
- annual reports of PAYG withholding where no ABN was quoted.