Pay as You Go (PAYG) Withholding and Instalments Explained – 5 Must Knows

What is Pay as You Go (PAYG) and what do I need to know?

PAYG

Many small businesses starting out in Australia, wonder what PAYG is, and what exactly it means to them.

Here are our 5 Must Knows for small business when it comes to PAYG.

1. PAYG Withholding and PAYG Instalments are DIFFERENT

PAYG withholding are the payments you withhold (and pay) from the wages and other payments you make to employees and some contractors to meet their tax obligations.

Pay as You Go (PAYG) instalments generally refers to payments you make to meet your’s (as the business owner) and your business’s income tax obligations.

2. Do I need to register for PAYG withholding?

You will need to register for PAYG withholding if:

  • you have employees
  • you have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from your payments to them
  • you make payments to businesses that don’t quote their Australian business number (ABN).

3. What do I need to do for PAYG withholding?

  • Register for PAYG withholding with the ATO as soon as you are aware of your obligations.
  • Withhold amounts from wages and other payments.
  • Lodge Business Activity Statements (BAS) and pay what you have withheld to the ATO as required.
  • Provide annual payment summaries to all employees and other payees by the dates required by the ATO.
  • Provide an annual PAYG withholding payment summary by the date required by the ATO.

4. Do PAYG instalments apply to me?

Business owners, investors and sub-contractors who earn a certain amount of income are generally required to make regular PAYG instalments.

The PAYG instalments are based on your expected income tax obligation on your business and investment income for the current financial year.

You should check the thresholds for PAYG instalments and determine your obligations via the ATO website.

5. What do I need to do for PAYG instalments?

The ATO will write to tell you that you have to pay instalments and outline your payment options.

You will need to lodge required statements and paying any required instalments before you lodge your tax return.

You should determine your obligations via the ATO website.

Don’t forget to check out our 5 Steps to Starting a Business.

Kylie Fennell

I love creating and curating content, strategies and resources that will make your day. I’m a Writer, Marketer, Business Advisor and Trainer with 20 years of industry experience. I'm also a passionate home cook. By far though, my biggest role to date has been (and continues to be) Small Business Owner and Mother.