Pay as you go (PAYG) withholding is a system for withholding amounts from payments to employees, other individuals and businesses. An entity will have withholding obligations if the entity:

• Has employees, including company directors and officeholders
• Has other workers such as contractors, and voluntarily agrees to withhold tax from payments to them
• Makes payments to other businesses, if they don't quote an Australian business number (ABN) to the entity, or
• Makes certain other payments that are subject to withholding.

If you are an employer or run a business and withhold amounts from payments, you need to:

• Register for PAYG withholding
• Register as an employer of working holiday makers (417 or 462 visa's) if applicable.
• Withhold amounts from wages and other payments
• Lodge activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
• Provide payment summaries to employees and other payees, and
• Provide the ATO with an annual report once each income year has ended.

Payment summaries and annual reports are not required in relation to amounts reported using single touch payroll.