What should I know about PAYG?

The PAYG or 'pay as you go' system is made up of two components: PAYG instalments and PAYG withholding.

PAYG instalments

This is a system for the reporting and paying of tax to the Australian Tax Office on liable business or investment income for the current income year. Actual tax liability is calculated at the end of the year when a firm's annual tax return is assessed, during which PAYG instalments are credited against this assessment to work out if you owe the ATO more tax or owed a refund.

For most businesses, PAYG instalments are paid quarterly but some businesses (primary producers, sports professionals and authors) can pay twice a year. Businesses will receive a letter informing them of their PAYG status.

PAYG withholding

PAYG withholding is when businesses withhold amounts from payments to payees and send the withheld amounts to the ATO. This is relevant for businesses with employees, contract workers or those that make payments to other firms that do not quote their ABN in transactions. Withheld amounts should be reported in a business activity statement.

For more infomation visit the ATO  website.

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