PAYG, which stands for Pay As You Go, is a system where your employer withholds a portion of your wages incrementally to pay your tax obligations. This withholding is called PAYG withholding. Your employer then gives you your after-tax income each pay period, whether that’s weekly, fortnightly, or monthly. The tax money your employer withheld goes towards paying the ATO on your behalf. The tax you paid through PAYG withholding will show up on your end-of-year income statement, which your tax agent uses to claim your tax deductions.

If you are an employer or run a business that withholds amounts from payments, you must register for PAYG withholding, register as an employer of working holiday makers if applicable, withhold amounts from wages and payments, report to the ATO using single touch payroll, lodge activity statements and pay withheld amounts to the ATO, provide payment summaries to employees and payees for amounts not reported through STP, and submit an annual report to the ATO at the end of each income year for any amounts not reported through STP.