PAYG Withholding for Employees

If you are an employee, your employer is required to deduct tax from your gross pay and pay this to the ATO on your behalf.  This is called PAYG Withholding or Pay-As-You-Go Withholding.

It is taken out of your pay each pay period and is used to offset the total amount of tax you owe when you lodge your tax return.  The amount of tax that your employer takes out is determined by the ATO calculators and cannot be varied unless you have an approved withholding variation in place.

PAYG Withholding for Employers

As an employer, each time you process a pay run (for yourself or for other external employees) your payroll system will tell you how much tax to withhold.  This amount then gets reported and paid to the ATO on your Business Activity Statement (BAS) or Instalment Activity Statement if you’re not registered for GST.

Depending on how much PAYG Withholding you process will determine how often you need to report it and pay to the ATO – less than $25,000 a year is reported quarterly or $25,000 – $1,000,000 is reported monthly.