Pay as you Go (PAYG) Tax Bookkeeping Basics
PAYG Withholding Tax. We have all seen this right? On our payslips, taking away our hard earned cash! This is your contribution to society, you are the water flowing into the pond. iGrow explains the basics and how this tax is calculated so that you know you are paying the right amount.
Registered Employers help their payees meet their end of year tax liabilities by collecting PAYG withholding from their pay. It is deducted from payments made to employees, other workers such as contractors (with voluntary agreements) and businesses that don’t quote their Australian Business number (ABN).
From the Employer’s perspective the due dates for paying and reporting withheld amounts depend on whether you are a small, medium or large withholder.
Small > withholds $25,000 or less a year, pays and reports amounts quarterly
Medium > withholds $25,001 to $1 million a year, pays and reports withholding amounts to ATO monthly
Large > an individual or business that withheld amounts total more than $1 million in previous year, amounts are withheld are paid and sent twice a week.
The employer is responsible for submitting these payments and reports on time.
Your employer will likely have a software system including Xero, Quickbooks, Reckon or MYOB that will automatically calculate the correct tax on your pay.
The attached current table lists the rates of tax on earnings (for Australian Residents);
Here is also a link to the weekly tax calculator;
Of course these things can become more complicated with the involvement of HECS debt, termination payments, salary sacrifice etc.
Ideally your PAYG tax taken will be sufficient so that when you lodge your income tax return you will not have to pay any further tax. If you have income from other sources that has not been taxed then it is a good idea to speak to your Accountant to see how much more water your will have to put into the pond or find some other mechanism to save on your tax.
iGrow Business Services is a Registered BAS Agent 25689866
The information/advice provided on this website is general advice only. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.