You will need to withhold amounts from payments you make to workers, including:

• payments to employees, company directors and office holders
• payments to workers under labour-hire agreements
• payments under voluntary agreements
• payments where an Australian business number (ABN) has not been quoted in relation to a supply.

Deducting tax each pay cycle is called pay as you go withholding or PAYG withholding.

You must deduct the appropriate amount of tax for employees, based on their gross pay, and send that amount to the ATO periodically on your employee’s behalf. This helps your employees to meet their end-of-year tax liabilities.

You will need to report your withholding amounts in a business activity statement (BAS). To do this, you must register for PAYG withholding before you first make a payment that is subject to withholding. This is required even if you don’t withhold an amount from that payment.

Most businesses that lodge their own BAS prepare and lodge online. If you have a registered tax or BAS agent they can lodge, vary, and pay on your behalf. You can also mail your original, completed BAS, using the pre-addressed envelope provided in your BAS package.

Small businesses usually lodge and pay a BAS quarterly, but you may need to do it monthly. Check your withholding reporting cycle so you report and pay on time.