Pay as you go (PAYG) withholding is a system for withholding amounts from payments to employees 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

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

• register for PAYG withholding

• 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

• provide the ATO with an annual report once each income year has ended.