Question

What are PAYG obligations? What is the main component of PAYG?How is PAYG paid? When will a business owner be required to pay PAYG on income?How is PAYG on income reconciled? What is the benefit for large clients making monthly PAYG instalments on wages paid?

Answer 1

What are PAYG obligations?

Pay as you go (PAYG) is a withholding tax which requires you to pay incremental amounts of your business's income to the ATO. These payments accumulate towards your expected end of year income tax liability.

What is main component of PAYG?

The types of payment that you withhold from are generally payments made to

- Employees

- Directors

- Business that do not quote their ABN to you

- Contractor with which voluntary agreement

How is PAYG paid?

PAYG are regular payments you make throughout the year (usually quarterly) towards your expected annual income tax liability

There are 2 ways to pay your PAYG installments:

1) Automatic entry: If your income is over the threshold when you lodge your income tax return, the Australian Taxation officer (ATO) will put you in PAYG installment system

2) Voluntary entry: You can plan ahead and reduce the chance of having to pay a large tax bill after you lodge your tax return