If you are required to withhold an amount from a payment, you must be registered for Pay As You Go (PAYG) withholding.
Common Payments for PAYGW
The most common payments you need to withhold amounts from are:
• payments to employees
• payments to directors, and
• payments to a business that doesn’t quote its ABN to you.
If you employ staff, you will need to register for PAYGW. The amount you withhold from their wage for tax gets sent to the Tax Office in the PAYG tax withheld section of your activity statement.
Companies and Trusts
If you operate through a company or trust and you’re employed by your business, you’ll also need to register for PAYGW. You are treated as any other employee.
Sole traders who do not employ anyone, are unlikely to ever need to register for PAYG Witholding. Instead, the Tax Office will calculate a PAYG income tax instalment amount for you to pay. PAYG instalments break up your expected tax liability into smaller regular payments (much like if you were on wages and tax was being sent to the ATO for you throughout the year). You do not have to register for this and options are available for varying the amount.
Less Common Payments for PAYGW
Depending on your circumstances, you may also need to withhold amounts from:
• payments to contractors who have a voluntary agreement with you
• payments to individuals under labour hire arrangements, and
• eligible termination payments.
Registering for PAYG Withholding
If you don’t already have an ABN, you can register for PAYG withholding at the Australian Business Register (ABR) at the same time you apply for an ABN.
If you already have an ABN, you can add PAYG withholding to your registration online at the ABR. You will need an Administrator Auskey to do this. Otherwise, you can register via the Business Portal, through your tax agent, or by calling the ATO on 132866.