What is PAYG Withholding?
Pay As You Go Withholding is the system Australian employers use to deduct tax from employee wages and remit to the ATO. Real-time reporting via Single Touch Payroll (STP) Phase 2 is mandatory at every pay event. Cash flow remittance is via BAS (quarterly or monthly).
Current Rate (Real-time STP at each pay event; remitted via BAS)
Marginal rates per ATO PAYG schedules + Medicare Levy
Example
An employer paying a A$80,000 salary withholds approximately A$15,500 tax + 2% Medicare across the year, reported at each pay run via STP.
Related terms
Single Touch Payroll Phase 2 is the ATO's mandatory real-time payroll reporting system. Employers send pay information (gross pay, tax, super, allowances categorized) to the ATO with each pay event. Annual finalisation is due 14 July each year.
The Business Activity Statement is the quarterly (or monthly for large businesses) form Australian businesses use to report and pay GST, PAYG withholding, PAYG instalments, FBT instalments and Wine Equalisation Tax. Filed via myGov, ATO Online, or accounting software.
PAYG Instalments are advance company tax (or income tax for sole traders) paid quarterly via BAS, calculated by the ATO based on prior year tax. Reduces the year-end tax balance.
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