Your withholding obligations depend on whether your worker is an employee or contractor. If your worker is:
- an employee, you generally have to withhold amounts from payments you make to them
- a contractor, you generally do not withhold amounts from payments you make to them (unless they request withholding by entering into a voluntary agreement with you).
To check if your worker is an employee or contractor, you need to review the whole working arrangement. Our employee or contractor pages can help you determine the status of your worker.
The most common payments you withhold amounts from are those to:
- your employees
- your directors
- businesses that don't quote their ABN to you
- contractors who have a voluntary agreement with you.
If you operate your business as a sole trader or partnership and you draw amounts from the business, this is not a wage and you don't have to withhold from these drawings. You make some provision for your income tax liability through PAYG instalments.
Payments, other than income from employment, may also need tax withheld, including:
- investment income to someone who does not provide their TFN
- dividends, interest and royalties paid to non-residents of Australia
- payments to certain foreign residents for activities related to gaming, entertainment and sports, and construction
- payments to Australian residents working overseas
- super income streams and annuities
- payments made to beneficiaries of closely held trusts.