Stay Ahead on PAYG Withholding Cycle Changes

There are upcoming adjustments to the pay as you go (PAYG) withholding cycle, set to take effect from 1st July. 

Here’s how these changes may affect your business. 

Understanding PAYG 

PAYG is a system implemented by the Australian Taxation Office (ATO) whereby employers withhold a portion of their employees’ wages to cover their income tax liabilities. This system ensures that tax is paid incrementally throughout the year rather than in a lump sum at the end of the financial year, providing a smoother more manageable approach to meeting tax obligations.

The ATO conducts annual reviews of PAYG withholding cycles taking into account a business’s annual withholding amount. The latest changes are based on your business’s withholding amounts reported under your Australian Business Number (ABN) in 2022-2023. The ATO determines annual changes based on the following classifications: 

Medium withholders 

• If withholding ranges from $25,001 to $1 million

Large withholders 

• If withholding exceeds $1 million

Your Obligations 

If you’re classified as a medium withholder you’re obliged to report PAYG withholding amounts on activity statements, pay monthly and verify that your stated amount matches the amount you reported using Single Touch Payroll (STP). 

STP is the payroll software you are using to streamline the reporting of employee pay, tax withholding and superannuation to the ATO.

If you’re classified as a large withholder you’ll get a new Payment Reference Number (PRN) to quote when you pay on the set payment dates. You’re not mandated to report PAYG withholding on activity statements, however it is advised to reconcile your reported STP and paid amounts. 

It is important to note that businesses affected by these changes must also update their payroll software before the 1st of July to ensure alignment with the new reporting and payment due dates. 

Our team of experts are well-versed in navigating regulatory changes and we can offer support to your business by: 

• Assisting in understanding how these adjustments may impact your business
• Offering guidance on updating your payroll software 
• Assist in requesting to remain on your existing cycle if you’ve estimated that your 2024-25 PAYG withholding amount will fall below the applicable threshold. 

For more information speak with your Simmons Livingstone advisor on 1800 618 800 or via email at admin@simmonslivingstone.com.au