Life can feel a lot more complicated once you’ve registered to collect GST. As certified accountants, we’re all too aware of this, so we’ve made it our mission to pick apart the complications and lay everything out for you in a straightforward way. On today’s agenda – the PAYG withholding section of your Business Activity Statements (BAS).
If your business is registered to collect GST, you will have to lodge an annual, quarterly, or monthly BAS form. Your frequency of lodgement will depend on your business turnover, but you can rely on the Australian Taxation Office (ATO) to contact you when your BAS is due.
Many business owners find BAS forms intimidating as it’s crucial to ensure your figures are clear and accurate. These calculations determine how much GST and Pay As You Go (PAYG) withholding you will need to forward to the ATO, so it’s not something the tax office takes lightly.
Pro Tax Tip: Though it does demand accuracy, the ATO does not need you to record amounts with a decimal point. You can round up or down to complete your BAS.
What is PAYG?
PAYG is the total salary, wages, and other payments you have paid as well as the amount of tax you withheld during the determined business period. You’ll direct these payments to the ATO in instalments, and you can generally opt for an amount you calculate or an amount determined by the tax office.
If you’re new to the BAS game and feeling overwhelmed, know that you’re not alone. Many small business owners go through the same uncomfortable settling-in period, and a certified tax accountant can be a great help. We deal with these things daily, so we’re happy to take the stress off your hands and free your time to focus on the aspects of your business you find genuinely fulfilling. If that sounds like what you need, contact your nearest ITP branch today. We offer unbeatable service at competitive rates, and our friendly accountants love lending a hand to Aussie business owners.
What is included in the PAYG section of the BAS form?
As an employer, you must consistently meet your employees’ tax obligations. You do this via PAYG, which you pay to the ATO on behalf of your team members. Of course, it’s not just employees that you’ll need to set money aside for.
All told, you will need to collect money for:
- Employees, company directors, and officeholders
- Workers under labour-hire arrangements
- Contractors and others working under voluntary agreements
- Businesses that didn’t quote their Australian Business Number (ABN)
A few things to remember:
- You must register for PAYG withholding before you withhold any money
- Cancel the relevant PAYG withholding registration if an employee leaves you
- Check that your workers are all legally allowed to work in Australia
- Understand that PAYG withholding is different from Payroll tax
How to fill out the PAYG tax withheld section of your BAS
Below, we cover the lines you’ll need to fill out in the PAYG tax withheld section of your BAS.
W1 – Total salary, wages, and other payments
These are the gross payments you have withheld. You should include:
- Payments to employees (For example, salary, wages, allowances, and bonuses)
- Payments made by a labour-hire firm to individual workers under a labour-hire arrangement
- Payments to religious practitioners
- Payments made under a voluntary agreement
- Gross attributed personal services income for an individual
You should not include:
- Salary sacrifice arrangements
- Super contributions
- Departing Australia superannuation payments
- Payments withheld because an ABN was not quoted
- Investment distributions withheld for non-quotation of a tax file number
- interest, dividends, or royalty payments from which you withheld an amount for a payment to a foreign resident
- Payments to foreign residents for entertainment, sports, construction, and casino gaming junket activities
If you did not make any payments, leave the boxes blank.
W2 – Amounts withheld from salaries, wages, and other payments shown at W1
Enter the total amount you withheld from any payments shown at W1.
W4 – Amounts withheld where no ABN is quoted
If you’ve made payments to suppliers who have not given their ABN to you, you must withhold 47% of the invoice amount and enter this number at W4.
W3 – Other amounts withheld (excluding W2 or W4)
This is where you enter any other type of withholding, such as:
- Interest, dividends, unit trust, or other investment distributions you made, where the person you are paying has not filled in a tax file number (TFN) declaration form or otherwise provided you with a TFN (this includes foreign residents)
- Interest, dividends, or royalty payments you made to a foreign resident
- Any departing Australia superannuation payments you made
- Any payments you made to foreign residents for:
- entertainment and sporting activities
- construction and related activities
- arranging casino gaming junket activities
If you have nothing to report, leave W3 blank.
W5 – Total amounts withheld (W2 + W4 + W3)
Add together the totals for W2 + W4 + W3. Do not include W1 in your W5 total.
Copy the total at W5 to 4 in the Summary section of your activity statement. If you don’t have this section in your BAS, don’t worry – this step won’t apply to you.
Your total withholding will be reported at 9 in the Payment or Refund section of your activity statement.
Pro Tax Tip: For your BAS lodgement to go smoothly, it’s best to keep on top of your bookkeeping and tally everything as you go. You should also set money aside for GST and PAYG. That way, you won’t have a shortfall when it comes time to lodge your BAS. If finances aren’t your strong suit, consider working with one of ITP’s professional bookkeepers who can handle all the boring number-crunching for you at a very reasonable rate.
If all of this sounds overwhelming or even just needlessly time-consuming, don’t stress. You can hire a registered tax practitioner or BAS agent to complete your BAS and lodge your statements for you.
Voted Australia’s most trusted Income Tax Professionals, ITP has been helping Australian businesses with their bookkeeping and business accounting needs for more than 50 years. Whether you need us every day of the week or just once a month, we’re happy to tailor our service to match your needs and budget. Contact one of our friendly accounting experts today to let us know how we can help.