The Pay As You Go program is a taxation system that allows you to pay income taxes gradually throughout the year, not just at the end of the financial year. Find out more about the procedure for registering for the PAYG program in Australia in 2024

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In some cases, you must withhold tax from payments you make to employees, certain contractors, or companies that do not provide their Australian Business Number (ABN). PAYG (Pay As You Go) withholding involves deducting tax from certain payments and paying it to the Australian Taxation Office. This helps employees reduce the amount of tax they have to pay at the end of the financial year.

The main purpose of the Pay As You Go program

The Pay As You Go (PAYG) program in Australia is a taxation system that allows you to spread your tax liability over the course of the year rather than paying the total tax at the end of the financial year. It has the following main components?

1. PAYG Withholding: a system whereby employers deduct and withhold taxes from their employees' salaries and remit them to the Australian Taxation Office (ATO). This helps employees avoid a large tax debt at the end of the year;

2. PAYG Instalments: a system for self-employed individuals and businesses to pay taxes based on pre-determined portions of their expected tax liability. This allows taxpayers to spread their tax liabilities over the course of the year;

3. PAYG Income Tax: tax liabilities for individuals and businesses that pay taxes based on income and expense reporting.

The main purpose of the PAYG program is to ensure regular tax payments to avoid large tax charges at the end of the financial year and to provide the state with stable revenues.

When do I need to withhold tax?

Generally, you need to withhold tax from payments made to your employees, directors, companies that do not disclose their tax identification number (ABN), and contractors who request a voluntary agreement. Detailed information on which payments are subject to withholding can be found on the Australian Taxation Office website.

If you are a sole proprietor or partnership, the money you take from your business for personal use is not considered wages. You do not need to withhold tax from such income. However, you can pay tax throughout the year through PAYG payments. This method helps to evenly distribute tax liabilities and avoid large payments at the end of the year.

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How do I register for the Pay As You Go program?

To withhold tax under the PAYG (Pay As You Go) scheme, you need to register before the first payment from which you plan to withhold tax. You can do this online through the Business Registration Service or have your tax agent or Business Activity Service (BAS) do it for you. Use the same form to register other taxes at the same time.

After registration, you need to determine the amount of tax you will withhold. Use the withholding tax calculator and tax tables on the Australian Taxation Office (ATO) website to help you do this. This will help you calculate the tax accurately and ensure that you pay your tax liabilities correctly.

Paying tax and filing reports

The time to pay tax and submit a report to the Australian Taxation Office (ATO) depends on the amount of tax withheld. If you withhold $25,000 or less per year, you must pay the tax quarterly and report it in your business reports. 

If the amount of tax withheld is between $25,001 and $1 million per year, you must pay the tax monthly and report it on your business activity report. You can check the exact payment and reporting deadlines on the ATO website to avoid penalties and ensure compliance with your tax obligations.

Annual reports and payment summaries

If you have reported your payments through Single Touch Payroll (STP), you do not need to file an annual report or payroll summary. Learn more about STP on the ATO website. For payments that were not reported through STP, you must provide employees with information about the payments by July 14, and submit an annual report to the ATO by August 14.

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Igor Usyk - Head of Legal Department at Visit World

For safe relocation to Australia, obtaining refugee status and employment, use the advice of an international lawyer.

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