Changes Are Coming to PAYG Withholding in 2025

If you pay employees or contractors, the way you report and pay tax to the ATO is about to change.

The Australian Taxation Office (ATO) has announced updates to the Pay As You Go (PAYG) withholding cycle, starting 1 July 2025. These changes could affect how often you report and pay withholding tax, depending on how much your business withholds each year.

Let’s break it down and explain what it means for you.

What is PAYG Withholding Again?

PAYG withholding is the tax you hold back from your employees' pay and send to the ATO on their behalf. Right now, how often you need to send that money to the ATO (monthly or quarterly) depends on how much tax you withhold over the year. If you withhold more than a certain threshold, you report monthly.

If it’s under that amount, you usually report quarterly.

What’s Changing from 1 July 2025?

The ATO plans to automatically update your withholding cycle if your business meets certain criteria.

For example:

• If your business has been growing and you're now withholding more tax than before, you might be moved from quarterly to monthly.

• The ATO will look at your total PAYG withholding amount for the 2023–24 financial year to decide.

  
  

They’ll let you know by June 2025 if your payment cycle is changing.

Why Is This Important for Business Owners?

Changing from quarterly to monthly reporting might not seem like a big deal—but it can have real effects on your cash flow, admin, and systems. Here's how:

• More Frequent Payments

Monthly payments mean you'll send money to the ATO more often. That could affect your budgeting and the timing of your cash flow.

• More Admin Work

You’ll need to run payroll reports and submit your PAYG information more frequently. If your systems aren’t ready, it could cause extra stress.

• Risk of Penalties

If you miss the new deadlines or report incorrectly, the ATO could charge penalties or interest. It's important to be prepared.

The earlier you prepare, the easier the change will be. If you’re not sure whether your business will be affected or you want to make sure you’re compliant, please do not hesitate to reach out and contact us.

Disclaimer: This article is intended to provide general guidance and is not specific advice. We encourage you to seek tailored advice for your circumstances.