The pay-as-you-go withholding system is used to put aside portions of tax throughout the financial year towards expected liability at year's end for the employees. Other common payments that you need to withhold tax from include director fees as well as businesses that have not quoted their Australian business number (ABN).
As an employer withholding amounts from payments, you need to:
- Register for PAYG withholding
- Withhold amounts from wages and other payments
- Lodge activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
- Provide payment summaries to employees and other payees
- Provide the ATO with an annual report once each income year has ended
Substantiation requirements for employers withholding PAYG are:
- Payment records with amounts withheld
- Copies of payment summaries
- Tax file number declarations and/or withholding declarations from employees
- Voluntary agreements
