Monthly or Real-Time? Big Changes to PAYG Withholding from 1 July 2025.

By Tina Zawila

This week we received correspondence from the Australian Taxation Office (ATO) on behalf of our clients regarding the upcoming changes to PAYG Withholding Tax.  PAYG Withholding Tax is the tax that you withhold from your employees’ wages and forward to the ATO monthly and/or with your quarterly Business Activity Statement.

Starting 1 July 2025, the ATO will implement changes to the Pay As You Go (PAYG) withholding cycles, potentially affecting employers' reporting and payment obligations. These adjustments are part of the ATO's annual review to align withholding cycles with businesses' annual withholding amounts.

Employers will be reclassified based on their total annual PAYG withholding as follows:

• Medium Withholders: Businesses withholding between $25,000 and $1 million annually will be required to report and pay monthly through their activity statements.

  
  

• Large Withholders: Those withholding over $1 million annually must remit payments electronically within 6–8 days after withholding, typically aligning with payroll dates. These employers will receive a new Payment Reference Number (PRN) ending in '70' for use in these transactions. Additionally, they must ensure that the amounts paid match the figures reported via Single Touch Payroll (STP), as reporting through activity statements is no longer necessary if STP is used.

  
  

If you are an employer who is subject to a change in your withholding status, you will receive notification from the ATO in April 2025.  It's crucial for affected businesses to update their payroll systems before 1 July 2025 to comply with the new reporting and payment schedules.

If a business anticipates a decrease in its PAYG withholding for the 2025–26 financial year, it can request to maintain its current cycle by submitting a 'Request to remain on a lower withholding cycle' form within 21 days of the ATO's notification.  This request should include the estimated withholding amount and the reason for the anticipated change.

These changes have the potential to adversely affect business cashflow by changing the remittance of PAYG Withholding Tax from monthly to weekly or fortnightly for large employers.  

If you need advice on how these changes will affect you and your business, call the professionals at UHY Haines Norton CQ on 07 4972 1300.