{"id":271450,"date":"2024-07-08T15:48:20","date_gmt":"2024-07-08T03:48:20","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?post_type=sbh&p=271450"},"modified":"2024-10-02T17:56:21","modified_gmt":"2024-10-02T05:56:21","slug":"payg-withholding","status":"publish","type":"sbh","link":"https:\/\/www.reckon.com\/au\/small-business-resources\/payroll-guide\/payg-withholding\/","title":{"rendered":"PAYG Withholding Explained: Pay Guide for Employers"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.23″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.0″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

As an employer, you likely need to withhold tax from your employee’s pay on behalf of the ATO. This is known as PAYG withholding.<\/p>\n

When it comes to paying your employees<\/a> and running compliant payroll processes<\/a>, understanding your PAYG withholding obligations is crucial.<\/p>\n

So, what exactly is PAYG withholding and how does it work?<\/p>\n

What is PAYG withholding?<\/h2>\n

PAYG refers to the \u2018pay as you go\u2019 system of paying an employee\u2019s income tax to the Australian Taxation Office (ATO).<\/p>\n

Instead of an employee being responsible for their own tax bill (like a freelancer<\/a> would) the PAYG system estimates the amount of tax each employee owes to the ATO, and as their employer, you pay this on their behalf.<\/p>\n

PAYG withholding refers to the act of withholding or keeping aside the expected income tax your employee will owe and using this withheld amount to pay the ATO directly.<\/p>\n

You need to make sure you calculate this correctly and meet all PAYG withholding obligations when reporting to the ATO.<\/p>\n

How does PAYG withholding work?<\/h2>\n

As an employer, the basic steps for PAYG withholding are as follows:<\/p>\n

    \n
  1. Before making payments to employees and withholding tax, register your business for PAYG withholding.<\/li>\n
  2. Receive tax file number declarations<\/a> and withholding declarations from your employees.<\/li>\n
  3. Regularly pay the ATO their owed withheld amounts according to your individual schedule.<\/li>\n
  4. Report the withheld PAYG amounts on your regular activity statements<\/a>.<\/li>\n
  5. Use STP-enabled software<\/a> to automatically report PAYG and other payroll information to the ATO.<\/li>\n
  6. You would previously provide a PAYG payment summary statement\u00a0to your employees, but now with STP, you don\u2019t have to. (Your employees can now access this information through MyGov.)<\/li>\n
  7. Lodge your PAYG withholding\u00a0annual report to the ATO every year before 14 August<\/a>.<\/li>\n<\/ol>\n

    PAYG and BAS<\/h2>\n

    PAYG also factors into your business activity statements (BAS). When you file your BAS<\/a>, you’re obliged to provide details about employee payments and the tax you withheld.<\/p>\n

    Do you have to use PAYG withholding as an employer?<\/h2>\n

    When they remunerate employees and run their payroll, virtually all employers need to use the PAYG withholding system.<\/p>\n

    You must undertake PAYG withholding if:<\/p>\n