What is PAYG Withholding and What Employers Must Know?

Many of you may be unaware of the PAYG system and how it can affect your business. The ATO has some methods to help you make tax season easy for you each year. One of the most common methods is known as Pay As You Go (PAYG). If you don’t know about it, you can ask your experienced tax accountant. If you don’t have a tax accountant, then you can also hire near your area by searching for ‘small business accountants near me.’ In today’s blog, we’ll discuss PAYG withholding and other related aspects to it. Let’s get started:

What is Pay As You Go (PAYG)?

PAYG or Pay As You Go is a system where the ATO allows you to pay some portion of future liability in advance to minimise the amount, which the ATO owns at the end of the financial year. If you pay regularly throughout the year, it can minimise the risk of paying a large tax bill later on and help businesses manage their cash flow in a better way. There are two types of PAYG, such as:

• PAYG Withholding (or PAYG – W) is a pre-payment on your employees’ behalf for their personal income tax obligations.

• PAYG Instalment (or PAYG – I) is a pre-payment for the business for its own income tax obligation.

What is PAYG Withholding?

PAYG is a withholding tax that you need to pay incremental amounts of the income of your business to the ATO. And, it is the tax payment you make throughout the year on the behalf of contractors, employees, and other payees. When you are allowed to make partial payments, you can protect yourself from paying a large amount on tax bills at the end of the financial year. Apart from this, if you want someone with vast knowledge of accounting, you can hire a chartered accountant. If you are living in Victoria, then you can also search for ‘chartered accountant near Victoria.’

Do You Need to Pay PAYG Withholding?

Many of you may have a question about whether you need to pay PAYG withholding or not. Well, if your organisation pays any of the following, then you have to pay PAYG withholding:

• Company directors

• Employees

• Members of parliament (Office holders)

• Businesses that don’t quote their Australian business number

The following are a few things you need to keep in your mind:

• You need to register for PAYG withholding before you pay which is subject to withholding. It is needed even if you don’t withhold an amount from a payment that is made.

• You must cancel your PAYG withholding registration if you stop to be an employer.

• Before you sign the work agreement, you have to check that the worker can work in Australia legally.

• PAYG withholding is not the same as payroll tax, which is a state tax.

Moreover, you can also ask your tax agent about these guidelines because they always keep themselves updated with these laws. If you don’t have an accountant, then you can also search for ‘accountants near me’ to know what accountants are near your location so you can choose one.

What are Your PAYG Obligations?

Being a business owner, you would have an obligation under the ATO rules to get tax from the payments you pay to employees and businesses to make sure that they fulfil their end of the financial year requirements. To check whether you have a withholding obligation or not, check if the following conditions apply:

• You are an employer

• You hire other workers, such as contractors and both of you enter into a voluntary agreement to withhold amounts from your payments to them

• You pay businesses that don’t quote their ABN

In addition to this, to know more about each and every factor of tax-related matters, you can hire a tax accountant. If you are living in Melbourne, then you can also look for tax accountants near Melbourne.

Conclusion

As an employer, it is important to know about PAYG withholding to know whether you should pay PAYG withholding or not. The blog also shares information on what will be PAYG withholding obligations. To know more about it, you can also contact Reliable Melbourne Accountants.