Employing Staff: PAYG Withholding & Payroll Tax

Rebecca Bigg

Employee PAYG Withholding Tax

Managing the TAX that you need to withhold and pay on behalf of your Employees can be a daunting prospect, understanding them is the first step.  The two main taxes employers must be aware of are PAYGW (pay as you go withholding) and payroll tax.

PAYG Withholding (PAYGW)

PAYG Withholding (also known as PAYGW) is the Australian System for withholding tax from salary payments to employees.

If you have employees, you must withhold an amount from the wages you pay them, to cover their income tax, any Higher Education Loan Programme (HELP) repayments and the Medicare Levy.

Under the PAYG withholding system, you must report and send all amounts withheld from your employees pay to the Australian Taxation Office (ATO) on a monthly or quarterly basis, depending on your registrations with the ATO and the amount you withhold each period.

As an employer, you must:

  • register for PAYG withholding with the ATO
  • work out the amount to be withheld from their pay
  • report and pay withheld amounts to the ATO
  • provide payment summaries to employees and lodge an annual report with the ATO after the end of each income year.

Learn more about PAYG and the withholding system.

(PAYGW can sometimes be confused with PAYGI – PAYGI actually relates to instalments paid to the ATO to offset a business’s income tax liability at the end of the financial year – it does not relate to employee tax).

Payroll tax

Payroll tax is a self-assessed, general purpose state and territory tax assessed on wages paid or payable by an employer to its employees, when the total wage bill of an employer (or group of employers) exceeds a threshold amount.

The rates and thresholds vary between states and territories within Australia and can be viewed on the Payroll Tax Australia site.

Returns are lodged, and payment of the liability made, at an agreed frequency (monthly, quarterly, or annually) to the respective revenue office in the Australian state and/or territory in which the wage payment is applicable.

 

Managing PAYG Withholding falls within the scope of services that we provide our Clients, please don’t hesitate to Contact Us if you’d like to discuss your PAYGW obligations further.