Pay as you go (PAYG) withholding is a system for withholding amounts from payments to employees, other individuals and businesses. An entity will have withholding obligations if the entity:
Has employees, including company directors and officeholders
Has other workers such as contractors, and voluntarily agrees to withhold tax from payments to them
Makes payments to other businesses, if they don't quote an Australian business number (ABN) to the entity
Makes certain other payments that are subject to withholding.
If you are an employer or run a business and withhold amounts from payments, you need to:
Register for PAYG withholding
Register as an employer of working holiday makers (417 or 462 visa's) if applicable.
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.
Payment summaries and annual reports are not required in relation to amounts reported using single touch payroll.