PAYG (Pay As You Go) withholding is an Australian system where employers withhold tax from employee wages and remit it to the ATO on their behalf.
PAYG withholding is a mandatory obligation for all Australian employers. When you pay employees, you must withhold income tax based on the ATO tax tables and the employee's tax file number (TFN) declaration. The withheld amounts are remitted to the ATO - typically monthly or quarterly depending on your business size. PAYG withholding applies to salary and wages, commissions, bonuses, allowances, termination payments and certain contractor payments (where no ABN is quoted). You report PAYG withholding amounts on your BAS. At the end of the financial year, you must provide payment summaries to employees showing total wages and tax withheld (now automated through Single Touch Payroll). Errors in PAYG withholding can result in penalties for the employer and tax shortfalls for employees. SortBooks accurately categorises PAYG withholding transactions in Xero, separating gross wages, tax withheld and net pay to ensure your BAS reporting and payroll records are aligned.
SortBooks helps with the bookkeeping behind payg withholding by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing payg withholding by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The BAS is an Australian tax form used to report GST, PAYG withholding, PAYG instalments and other tax obligations to the ATO, typically lodged quarterly.
The ATO is Australia's principal tax collection agency, responsible for administering income tax, GST, superannuation, excise and other federal tax obligations.
Payroll is the process of calculating and distributing wages, withholding taxes, managing super/pension contributions and complying with employment tax obligations.
STP is an Australian payroll reporting requirement where employers report salary, wages, PAYG withholding and superannuation information to the ATO each pay cycle.
Tax compliance means meeting all your obligations to file tax returns, make payments and maintain records as required by your country's tax laws and tax authority.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.