Pay As You Go (PAYG) Withholding

• What is PAYG withholding?

• Do I have to withhold?

• Employee or contractor?

• How much do I withhold

• What is PAYG instalments?

• Reporting Options

What is PAYG withholding?

PAYG withholding is an employer's legal obligation to withhold amounts from payments made to employees for income tax purposes. An employer must register for PAYG withholding.

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Do I have to withhold?

An employer is required to withhold an amount if the payment is made to an employee. This is the reason why it is so crucial to determine whether a person is an employee or a contractor.

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Employee or contractor?

An employee is a worker that an employer employs in the business. A contractor is a worker who is self-employed and has a contract with an employer to provide services.

Sometimes the distinction between an employee and a contractor is not clear. In making such a determination, all the facts and circumstances surrounding how an employer engages them and how the work is performed must be considered. Factors which must be considered include the worker's degree of control over work, their independence, payment, commercial risks, the ability to delegate and whether tools and equipment are provided by the employer or the worker.

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How much do I withhold?

Calculation of how much should be withheld is based on tax tables published by the ATO (accessed via their website) and the information provided by employees in their tax file number declaration.

Employers may be liable to a penalty where there has been no withholding or if an incorrect amount has been withheld.

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Pay As You Go (PAYG) Instalments

What is PAYG instalments?

PAYG instalments is a system for paying amounts towards your expected end of year income tax. The actual income tax amount due is calculated when an annual income tax return is lodged.

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Reporting Options

PAYG instalments can be made quarterly or annually. An election must be made by the due date of the first activity statement for the income year. That election cannot be changed until the first quarter of the next income year.

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If you like more information or assistance regarding PAYG or other tax related matters, complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.