What is PAYG withholding?

As an employer, it is an obligation to ensure that all payees associated with you meet their tax liabilities at the end of the year. In order to do this, PAYG (Pay As You Go) Withholding helps you withhold amounts throughout your year from payments that you make to your employees, businesses, contractors, among others. These payments that you withdraw throughout the year gets accumulated towards your tax liability at the end of the year.

As an employer, you are legally required to withhold portions of payments made to employees, contractors, among others so as to meet your tax liabilities.

When withholding payments from employees, they can claim these amounts at the end of the year to meet their tax liabilities. Similarly, the withheld amount can also be used by the employer to meet the year-end tax liabilities.

As an employer, you can determine if you have withholding obligations if the following applies:

  1. You are an employer.
  2. You make and receive payments from businesses without their ABN.
  3. You employ other workers (for example contractors) and enter voluntary agreements with them to withhold amounts from your payments that you make to them.

If any of these criteria apply to you, you are first required to register for a PAYG withholding.

How to register for PAYG?

By following the steps below, you can easily register for PAYG withholding and get started on withholding your first amount from the payments that you make.

If you have an Australian Business Number (ABN), you can register for a PAYG withholding through

  1. The Australian Taxation Office (ATO) online business portal.
  2. A registered tax agent or BAS agent.
  3. Standard Business reporting compatible software.
  4. ATO phone line if you are an authorized business contact.

Additionally, you can also manually register for the PAYG withholding through form NAT 2954 through the ATO.

If you do not need to quote your ABN for withholding amounts, you can register for PAYG withholding in the following ways.

  1. Contact ATO phone line.
  2. Contact your tax agent or BAS agent
  3. Complete the NAT 3377 form.

How to cancel PAYG?

If you cease to be an employer or in other circumstances, you can cancel your PAYG withholding by:

  1. Contact ATO business phone line and talking to the customer service representative.
  2. Complete application form to cancel registration (NAT 2955)
  3. Contact your tax or BAS agent.

Who can apply for PAYG?

The registration is available for existing businesses with ABN. Additionally, it is also available for new businesses starting as a sole trader, company, partnership, trust, among others. You can visit the ATO website for more information and details on registering for the PAYG withholding service.

Next steps

To ensure that you are compliant with the laws, you can visit the ATO office website or contact your tax agent to get more information about PAYG withholding. When an employee leaves or retires, or in other circumstances where you are no longer obliged with withholding payments, then contact with their business line and talk to a customer service representative, he/she will guide you for the next steps.

References;

  1. https://www.business.gov.au/registrations/register-for-taxes/register-for-pay-as-you-go-payg-withholding
  2. https://www.ato.gov.au/Business/Registration/Work-out-which-registrations-you-need/Taxation-registrations/Pay-as-you-go-withholding/
  3. https://lawpath.com.au/blog/what-is-payg