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PAYG withholding

PAYG withholding is system that collects taxes from the payments those employers makes to their employees and businesses, so that they can meet their tax obligations.

Taxpayers will have withholding liabilities if any of the following conditions applies

  • Taxpayers have employees
  • They have other workers, such as contractors, and taxpayers enter into voluntary agreements to withhold amounts from their payments to them.
  • Taxpayers make payments to businesses that don’t have ABN.

    If taxpayers make payments related to withholding, they must:

  • Register for PAYG withholding
  • File activity statement and make payment to ATO
  • Provide summaries of amount paid to their employees and other payees.
  • Provide ATO with a PAYG withholding payment summary along with annual report.

There are many ways to register you for PAYG withholding. Taxpayers must apply for registration by the day on which they were first required to withhold an amount from a payment.

All Australian states and territories have a payroll tax (state tax), which are computed on the wages paid or payable by their employees

Taxpayers need to give each of their employee’s summary specifying how much they have paid to them in a financial year and how much taxpayers withheld from the payments. Taxpayers must also send ATO an annual report summarizing all payments and amounts withheld for the year.

When an employee or contractor stop working for taxpayers, taxpayers liabilities may include making and reporting employment termination payments (ETP).

PAYG withholding variation application 2016
Taxpayers should use this application form if they want to reduce the tax withheld from income paid to them for the year ending 30 June 2016.

The main purpose of varying the rate or amount of withholding is to make sure that the amount withheld during the income year bests meets your end of year tax liability.

Processing times
The processing time for an application depends on the method taxpayers use to file their application. If they file

  • Online using an E- Variation, taxpayer’s application may be processed within 28 days.
  • By paper, taxpayer’s application may be processed within 56 days.
    If taxpayers can’t file online, they need to order a paper application by:
  • Visiting Online ordering and searching for NAT 2036
  • Phoning ATO automated self- help ordering service on132865

Phoning ATO automated self- help ordering service on 132865

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