PAYG withholding is when you take out (withhold) tax from some payments and pay it to the Australian Taxation Office.

It helps workers reduce the tax they need to pay at the end of the financial year.

When you need to withhold tax

You generally need to withhold tax from payments you make to:

  • your employees
  • your directors
  • businesses that don't tell you their ABN
  • contractors who ask you to enter into a voluntary agreement.

Check the payments you need to withhold tax from on the Australian Taxation Office website.

If you are a sole trader or partnership

Money you take out of your business to pay yourself is a personal drawing, not a wage.

You don't need to withhold tax from personal drawings.

You can still choose to pay tax throughout the year as PAYG instalments.

How to register

You must register for PAYG withholding before you make the first payment you withhold tax from.

You can register online or ask your tax or business activity statement (BAS) agent to register for you.

Register for PAYG withholding (and other taxes)

Register online through the Business Registration Service. You can use the same form to register for other taxes at the same time.

Register for PAYG withholding

After you register

1. Work out how much tax to withhold

Use the tax withheld calculator and tax tables on the Australian Taxation Office (ATO) website to help you.

2. Pay and report the tax

When you need to pay and report to the ATO depends on how much tax you withhold.

If you withhold $25,000 or less a year you:

If you withhold $25,001 to $1 million a year you:

  • pay the withheld tax each month
  • report the withheld tax on business activity statements each month.

Check when to pay and report on activity statements on the ATO website.

3. Send payment summaries and lodge an annual report

You don’t need to send payment summaries or lodge an annual report if you reported your payments through Single Touch Payroll (STP). Learn what STP is on the ATO website.

For payments you did not report through STP, you need to:

  • give your employees a payment summary by 14 July
  • lodge a payment summary annual report with the ATO by 14 August.

Learn about payment summaries and annual reporting on the ATO website.

Was this page helpful?