Understanding your obligations under Australia’s Pay As You Go (PAYG) withholding system is essential for staying compliant and avoiding unnecessary penalties. In this blog, we’ll discuss when you are required to register for PAYG withholding, who it applies to, and how to ensure your business remains compliant.
Overview of PAYG Withholding
Under PAYG withholding, you are required to withhold tax from certain payments made to others. This includes payments:
- to office holders, company directors, and employees
- to workers under labour-hire agreements
- under voluntary agreements
- where an ABN has not been quoted in relation to a supply.
You need to report any withheld amounts in the PAYG tax withheld section of your BAS, and you are required to pay all withheld amounts to the ATO. If you don’t comply with the PAYG withholding obligations for a payment to a worker, you will not be eligible for a deduction for that payment. Penalties may also apply. To comply with PAYG withholding obligations and avoid penalties, you can get Melbourne accounting services.
When Do You Need to Register for PAYG Withholding?
You are required to register for Pay As You Go (PAYG) withholding before you need to make a payment that is liable to withholding. This is necessary even if you don’t withhold any amount from a payment you have made. Use the Australian Business Register to register your business for:
- an Australian Business Number (ABN)
- GST
- PAYG withholding
- a business name.
If you are required to withhold tax but don’t need an ABN, you may have to register for a PAYG withholding account.
How to Register for or Cancel PAYG Withholding?
You can cancel or register for PAYG withholding if you:
- have an ABN
- Don’t have an ABN but are required to withhold tax.
If you have an ABN
If you have an active Australian Business Number, you can register or cancel your PAYG withholding business account:
- online using Online services for business
- through a registered BAS agent or tax agent. When searching for ‘tax accountants near me’, make sure they are familiar with PAYG obligations.
- Using Standard Business Reporting compatible software
Registered tax agents can use Online Services for agents to cancel or update a client’s tax registration.
If you don’t have an ABN but need to withhold tax
You have to register for a PAYG withholding account if you don’t need an ABN but need to withhold tax from a payment. You are required to withhold tax if:
- You self-manage your National Disability Insurance Scheme funds and employ staff directly
- A supplier has not quoted their ABN
- You hire or intend to hire a person such as a cleaner, nanny, cook or gardener
- You pay dividends, royalties, or interest to non-residents, or withhold from or report investment income to residents in Australia.
You can set up a PAYG withholding account without holding an ABN by:
- Calling the ATO business line and speaking with a customer service representative
- Completing and lodging an Application to register a PAYG withholding account
- Contact your registered tax agent or BAS agent to arrange the registration on your behalf
If you need to cancel your PAYG withholding account, you can:
- Call the ATO business line on 13 28 66 and speak with a customer service representative
- Order and complete an Application to cancel registration (NAT 2955) form through the ATO’s publication ordering service for business
- Ask your registered tax agent or BAS agent to manage the cancellation for you
Conclusion
Registering for PAYG withholding is essential if you are required to withhold tax from payments you make. You must register before making any payment that is subject to withholding, even if no tax is ultimately withheld. Staying compliant with your PAYG obligations helps you avoid penalties and ensures your business meets its reporting and payment responsibilities. To get expert help, you can speak to Reliable Melbourne Accountants.