Pay As You Go Withholding
PAYG-W
PAYG-W stands for Pay As You Go Withholding. These are tax amounts that the employer withholds from their employees' salary and wages, to then be paid to the ATO on their behalf. Businesses also withhold money from contractors who might have voluntary agreements in place and businesses who don't quote their ABN.
This is different to payroll tax, which is a state tax. So many taxes, I know.
For most of my clients and community, the amount of PAY-W will be amounts withheld from employees, so we will focus on that! The ATO has the full list here though.
Get Registered
Before you withhold money from employees you need to register for PAYG-W. You can register your business for an ABN or for GST, PAYG-W and other things through the Australian Business Registrar here. Or, with the ATO - you just give them a call, or ask your accountant to sort this out for you.
Hot Tip
Once you enter this crazy realm of being an employer, my recommendation is that you invest in Xero accounting software (or an equivalent - it's just that Xero is my favourite and where my expertise lies). The software has a payroll function within it, and it will really help you to keep good records, and even help you prepare for your reporting obligations to the ATO and to your employees. Just make sure it is set up correctly or you might be shooting yourself in the foot, or at the very least not making the most of what you are paying for.
Side note: if you are employing people, please make sure you are also registered with your State's equivalent of "Return to Work SA" (i.e. work cover). This is a legal obligation!
Reporting
There are a couple of admin burdens with this one, sorry friends. Firstly, as the employer who is withholding tax, you obviously need to tell the ATO about this and pay that tax to them. You do this in 2 ways:
- Single Touch Payroll ("STP")
- End of year PAYG Payment Summaries
At the end of the year, there might be multiple summaries you need to report to the ATO. See more details here. It is in everyone's best interest that the reporting is done efficiently because that is what ends up in the employee's prefill in their tax returns.
You also need to tell your employees about how much you paid them - wages/salary, tax withheld, superannuation etc. Each pay run you should be sending them their payslip with their current pay run info on it and their 'year to date' totals too. At the end of the year, what you report to the ATO gets fed through to your employees MyGov and their tax returns for them... assuming you did it accurately and in a timely manner.
So, congrats if you have levelled up to 'employer'... but warning: this comes with great responsibility. If you need a hand setting up your accounting software, understanding your obligations or doing any of the calculations, just get in touch.
You might also like to check out our VIDEO on How To Save For Tax here.
xxx Lauren
