What Is PAYG Withholding?
Pay As You Go (PAYG) withholding is the system by which employers deduct tax from payments they make to employees and certain other payees, and send that money to the Australian Taxation Office (ATO). It's essentially collecting your workers' income tax on behalf of the ATO throughout the year, rather than leaving them with a massive tax bill at the end of the financial year.
If you employ anyone — even a single part-time worker — you almost certainly need to register for and operate PAYG withholding.
When Must You Withhold?
Payments to Employees
You must withhold tax from all payments to employees, including:
- Wages and salaries
- Commissions and bonuses
- Allowances
- Directors' fees
- Termination payments (employment termination payments have specific rules)
- Unused leave payments on termination
This applies from the first dollar paid. There is no minimum threshold for employee withholding.