Pay as you go (PAYG) withholding is a system for withholding amounts from payments you make to employees and businesses so they can meet their end-of-year tax liabilities.
You will have withholding obligations if you:
- Have employees
- Have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from payments you make to them, or
- Make payments to businesses that do not quote their Australian business number (ABN).
If you make payments subject to withholding, you must:
- Register for PAYG withholding
- Withhold amounts from wages and other payments
- Lodge activity statements and make payments to us
- Provide payment summaries to employees and other payees
- Provide the ATO with a PAYG withholding payment summary annual report.
You must apply for registration by the day on which you are first required to withhold an amount from a payment.
A payment summary shows how much you paid a worker and how much you withheld during the financial year. The payment summary you need to use and when you provide it depend on a range of factors including whether the worker was a contractor or an employee. An annual report summarises all payments and amounts withheld for the year.
If you cease to be an employer, you should cancel your registration for PAYG withholding.