Understanding PAYG and FBT

When you pay employees or contractors, you may need to withhold tax from their pay and send these amounts to the taxation department on a regular basis. As an employer, the most common types of payments you need to withhold tax from are:

  • employee wages, salary, commissions, allowances and bonuses
  • payments to company directors and company office holders
  • payments to individuals under labour-hire arrangements
  • employment termination payments or compensation payments
  • sickness or accident payments
  • payments to contractors who have a voluntary agreement with you
  • payments to contractors who do not provide an Australian business number (ABN)

If you don't already have an ABN, you can register for PAYG withholding at abr.gov.au at the same time as you apply for an ABN, using the same form.

You should register once you know that you will be required to withhold an amount. You must apply to register by the day on which you are first required to withhold an amount from a payment.

If you have an ABN, you can register for PAYG withholding:

  • online through the ATO’s Business Portal at bp.ato.gov.au
  • online through the Australian Business Register at abr.gov.au
  • by phoning 13 28 66
  • by completing Add a new business account (NAT 2954) – send your completed form to the address shown on the form
  • through your tax or financial advisor

Fringe benefits tax (FBT)

As a business owner you are required to pay FBT on certain benefits you provide to your employees. FBT is different to income tax and is based on the taxable value of the fringe benefits you provide.

Employees can receive benefits such as:

  • the use of a work car for private purposes
  • a cheaper loan
  • paid health insurance costs
  • cleaning services for private residence
  • reimbursement of nonbusiness expenses such as school fees or private health insurance
  • paid entertainment such as dining or recreation

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