What is PAYG Witholding?

PAYG Witholding – New monthly reporting to the ATO

When you pay your employees, you must withhold a certain amount of tax from their pay and pay this to the ATO.

This is called ‘PAYG Withholding’. You withhold this tax on behalf of your employees. They can claim against the amount withheld at the end of the financial year.

Monthly Instalment Activity Statement (IAS)

The IAS is a pre-printed document issued by the ATO every month, which summarises the amounts of PAYG instalments, PAYG withholding and ABN withholding.

If, as an employer, you withhold more than $25 000 from wages per year, you must report this to the ATO monthly.

The ATO will review your withholding payments each financial year to check if your withholding cycle needs to be changed. If it does, they will notify you of this accordingly.

The withholding cycles are based on the following;

• If you withhold $25 000 or less per year, you are required to report and pay ‘PAYG withholding’ quarterly;
• If you withhold more than $25 000 and up to $1 million per year, you are required to report and pay ‘PAYG withholding’ monthly;
• If you withhold more than $1 million per year, you are required to pay ‘PAYG withholding’ within 6-8 days of an employee having been paid.

Difference between PAYG Instalments & PAYG withholding

PAYG Instalments:

These are pre-payments made to the ATO for your income tax obligation;

PAYG Withholdings:

These are pre-payments made to the ATO on behalf of your employees for their personal income tax obligations. 

Author

Lynne Linton