Registering for PAYG Tax:
Before you can withhold any part payments for PAYG purposes (or where an ABN has not been quoted), you must register with the ATO. Your registration with the ATO is quite simple and can be done either by submitting a form (paper or electronically), or calling the ATO.
Registration must be done by the time you first withhold from a payment. Note that if you’ve applied for an ABN, and were registered under the PAYE system, it is not necessary to re-register for PAYG withholding.
The table below outlines how PAYG requirements differs depending on the size of the business.
|Size:||Definition:||When to pay:|
|SMALL||You’re not classified as being a medium or large withholder, and you’ve withheld money for PAYG purposes from a minimum of one payment from an employees wages/salary||Due quarterly – exact date can vary and is stated on activity statement. NB: ATO must be told of amount withheld in activity statement.|
|MEDIUM||Amount withheld for the year is more than $25000, but less than $1 million – determined by the ATO.||Due monthly – exact date can vary is stated on activity statement. NB: ATO must be told of amount withheld in activity statement.|
|LARGE||Amount withheld for the year is more than $1 million, and the ATO has concluded that you’re a large withholder.||Twice weekly, i.e.:Withheld Sat – Tues payable on following Mon.Withheld Wed -Fri payable on following Thurs.|
TFN Withholding Declaration:
When hiring a new employee, the employer must receive their TFN declaration form within 28 days of the employee starting work. If employed by more than one person, the employee must have lodged separate TFN declarations with each. After the 28 days, if the declaration has still not been received, the employer must take 46.5% out of the employee’s earnings for tax withholding. Once the declaration is received, the employer must send the original declaration to the ATO within 14 days, and keep a second copy themselves.
What to Withhold:
In most circumstances you will need to withhold amounts from the following payments:
- Where labour hire arrangements are made
- Where the payee has elected voluntary amounts to be deducted*
- If an ABN hasn’t been quoted
* PAYG withholding is an obligation by law. Though, the employees are given the option to have different deductions made. For example, voluntary superannuation contributions, donations to charities, etc.
For every employee that acquires payments under the PAYG withholding system, an entity must fill out a payment summary.
Reporting is done via your activity statement – this includes both amounts withheld from employees, as well as those from businesses where an ABN was not quoted. When it comes to termination payments, you need only report them if the sum paid is in cash, and greater than $5000.
The world of tax can be extremely complex and if obligations are not adhered to it can often become quite stressful, not to mention costly. The accountants, lawyers and tax agents at The Quinn Group are able to assist you with all tax and ATO related matters. For advice or more information contact us now by submitting an online enquiry form or call 02 9223 9166.