PAYG withholding, 2026-27PAYG withholding is the tax an employer takes out of wages and sends to the ATO on the employee’s behalf. This page gives the 2026-27 rules in one place: who must register, the three withholder cycles, every due date from July 2026 to July 2027, the updated tax tables, how the figures reach the ATO, and what happens when it is paid late.
The short answer
PAYG withholding is the pay as you go system for tax taken out of payments at the source. An employer works out the tax on each employee’s pay from the ATO tax tables, keeps that amount back, pays the employee the rest and sends the withheld amount to the ATO. The employee gets a credit for it in their tax return. The same system covers directors’ fees, contractors who have signed a voluntary agreement, and suppliers who do not quote an ABN (ATO, Payments you need to withhold from, last updated 11 June 2025).
You must register before the first payment that is subject to withholding, even if the amount to withhold on it turns out to be nil. Registration is through the Australian Business Register with the ABN and GST, through Online services for business, or by your registered tax or BAS agent (ATO, Pay as you go withholding, last updated 24 December 2025).
How often you report and pay depends on how much you withhold in a year: up to $25,000 is quarterly, $25,001 to $1 million is monthly, and more than $1 million is paid within days of each pay run. The amounts are reported each payday through Single Touch Payroll and the period totals go on the activity statement.
Sole traders and partners do not withhold from their own drawings, because drawings are not wages; that income is taxed through PAYG instalments, explained further down.
Withholder cycles
The ATO places every withholder in one of three cycles, based on the total withheld in a financial year, and writes to you if the cycle needs to move up.
| Status | Annual withholding | How often you pay | How you report |
|---|---|---|---|
| Small withholder | $25,000 or less | Each quarter | Quarterly activity statement. A small withholder can ask the ATO for monthly statements instead |
| Medium withholder | $25,001 to $1 million | Each month | Monthly activity statement |
| Large withholder | More than $1 million in a previous financial year, alone or as part of a company group | Electronically within 6 to 8 days of each withholding event, such as a pay run | Not on the activity statement. Paid with a unique payment reference number (PRN) the ATO issues |
Sources: ATO, Paying and reporting PAYG withholding amounts to us (QC27076, last updated 21 November 2025); ATO, Small and medium withholders (QC51685, 21 November 2025); ATO, Large withholders (QC105873, published 30 March 2026), as at 1 October 2026.
If the ATO moves you up a cycle and you expect next year’s withholding to stay under the threshold, you have 21 days from the letter to ask to stay where you are; seasonal or part-year work counts, cash flow does not (ATO, Changing a withholding cycle, 11 June 2025).
Due dates 2026-27
The due date is printed on the activity statement: the 28th of the month after a quarter ends, or the 21st of the following month for a monthly statement. When that date falls on a weekend or public holiday you have until the next business day (ATO, Due dates for lodging and paying your BAS, last updated 17 September 2026). The table applies that rule to the 2026-27 calendar.
| Quarter | Small withholder: quarterly statement due | Medium withholder: monthly statements due |
|---|---|---|
| July to September 2026 | Wednesday 28 October 2026 | 21 August, 21 September and 21 October 2026 |
| October to December 2026 | 28 February 2027 is a Sunday, so Monday 1 March 2027 | 23 November 2026 (the 21st is a Saturday), 21 December 2026 and 21 January 2027 |
| January to March 2027 | Wednesday 28 April 2027 | 22 February and 22 March 2027 (the 21st is a Sunday both months), and 21 April 2027 |
| April to June 2027 | Wednesday 28 July 2027 | 21 May, 21 June and 21 July 2027 |
A quarterly lodger who lodges online may be eligible for an extra two weeks on quarters 1, 3 and 4, and a registered agent may have longer again. Quarter 2 already includes a one-month extension. Check the date on your own statement before relying on the calendar above.
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Large withholders
A large withholder pays twice a week, on a day set by the day the amount was withheld, electronically and with the PRN the ATO issued. A payment made with the wrong PRN is not recognised as PAYG withholding.
| Amount withheld on | Must be paid to the ATO on |
|---|---|
| Monday or Tuesday | The following Monday |
| Wednesday | The second Thursday after that day |
| Thursday or Friday | The following Thursday |
| Saturday or Sunday | The second Monday after that day |
Source: ATO, Large withholders, as at 1 October 2026. A public holiday due date moves to the next working day. A small amount withheld outside the regular cycle can wait for the next regular payment date if it is the lesser of 0.5% of last year's withholding or $50,000.
How much to withhold
Six inputs decide the figure. Payroll software applies them; the employer is responsible for the answers that go in.
Weekly, fortnightly, monthly, or daily and casual. Add allowances and irregular payments to the normal earnings, ignore the cents, and read the amount from the table or the ATO lookup tool.
The employee's answers set the column: tax-free threshold or not, resident or foreign resident, study loan or not. If no valid declaration arrives within 14 days of starting, tell the ATO through STP Phase 2 reporting.
A resident who claims it is taxed from the column that spreads $18,200 of tax-free income across the year. If the declaration says the employee is not claiming it from you, use the no-threshold column.
Withhold 47% from a resident and 45% from a foreign resident, with no offsets, Medicare adjustment or study loan component. An employee who has applied for a TFN has 28 days to give it to you.
A HELP, VSL, SSL or Australian Apprenticeship Support Loan debt adds an amount from the separate study and training support loans table.
A withholding declaration can reduce the amount for a tax offset, and a Medicare levy variation declaration where the employee qualifies. Neither applies without the tax-free threshold.
The ATO's tax withheld calculator (updated 24 June 2026) applies all of these for 2026-27, and Schedule 1 holds the formulas for anyone running their own payroll system. Termination lump sums, back payments, bonuses and working holiday makers each have their own schedule.
Tax tables 2026-27
All 15 withholding schedules and 12 tax tables were reissued for payments made from 1 July 2026, because the Treasury Laws Amendment (More Cost of Living Relief) Act 2025 cut the rate on income between $18,201 and $45,000 from 16 cents to 15 cents in the dollar and raised the Medicare levy low-income thresholds (ATO, Tax tables, last updated 17 June 2026). A payroll file still running the 2025-26 tables withholds too much. The tables are built from these resident rates, before the 2% Medicare levy:
| Taxable income 2026-27 | Tax on this income | Change from 2025-26 |
|---|---|---|
| $0 to $18,200 | Nil | No change |
| $18,201 to $45,000 | 15c for each $1 over $18,200 | Was 16c |
| $45,001 to $135,000 | $4,020 plus 30c for each $1 over $45,000 | Base amount was $4,288 |
| $135,001 to $190,000 | $31,020 plus 37c for each $1 over $135,000 | Base amount was $31,288 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 | Base amount was $51,638 |
Source: ATO, Tax rates for Australian residents, last updated 13 August 2026.
Worked examples from the ATO's own tables, all published 17 June 2026. Weekly earnings of $563.60: withhold $33 with the tax-free threshold, $108 without (weekly tax table). Fortnightly earnings of $989.80: $40 or $176 (fortnightly tax table). Monthly earnings of $4,311.68: $589 or $1,070 (monthly tax table). A year with 53 weekly pays can leave an employee short, because the tables assume 52; the weekly table lets them ask for an extra $3, $7 or $12 a week.
STP and the activity statement
Single Touch Payroll has been mandatory for every employer since 1 July 2019, and all should now be on STP Phase 2 (ATO, What STP is). Each pay run sends wages, withholding and super liability to the ATO from the payroll software, and the ATO uses that data to pre-fill labels W1 and W2 on the activity statement (ATO, STP and activity statements, 15 August 2025). Paying is a separate step: the STP report does not move any money.
| Step | When | What it covers |
|---|---|---|
| STP pay event | On or before each payday | Gross wages, PAYG withheld and super liability for every employee in the pay run |
| Activity statement, labels W1 and W2 | Quarterly or monthly, by the dates above | Totals for the period, pre-filled from STP; the withheld amount is paid with the statement |
| STP finalisation declaration | By 14 July | Confirms the year-to-date figures for every employee paid in the year, including casuals and leavers, so their income statement shows as tax ready |
| Closely held payees | By 30 September | Finalisation for family members and directors who are closely held payees |
| PAYG payment summary annual report | By 14 August | Only for payments not reported and finalised through STP |
| Taxable payments annual report | By 28 August | Payments to contractors, for businesses in the industries that must lodge a TPAR |
Sources: ATO, End-of-year finalisation through STP (16 October 2025) and ATO, PAYG withholding annual reports (11 June 2025), as at 1 October 2026. Payments to suppliers who did not quote an ABN go on a separate annual report by 31 October.
Late withholding
Four separate consequences can follow, and they stack. The first two are the ones that surprise small employers.
| What went wrong | What follows | Source |
|---|---|---|
| You did not withhold, or did not pay an amount withheld | A penalty equal to the amount that should have been withheld or paid | ATO, Failure to withhold |
| You did not withhold from a worker, or withheld but did not report it | The wage, fee or contractor payment is not deductible. An honest error in the amount does not cost the deduction, and a voluntary disclosure before an audit starts can save it | ATO, Removing deductions for non-compliant payments (11 June 2025) |
| You reported but paid after the due date | General interest charge, worked out daily on a compounding basis. GIC incurred from 1 July 2025 is not deductible | ATO, General interest charge (10 June 2026) |
| A company did not pay its PAYG withholding | Each director is personally liable for the unpaid amount. The ATO issues a director penalty notice and can recover 21 days later. A new director has 30 days from appointment to have the company pay or enter administration | ATO, Director penalties (16 April 2026) |
The amount withheld is the employee's money, which is why directors are held to it personally. Ask for a payment plan before the due date, not after it.
Instalments or withholding
The two share a name and an activity statement, and nothing else. PAYG withholding is tax you take out of someone else's pay and send to the ATO; it goes at labels W1 and W2. PAYG instalments are prepayments of the expected tax on your own business and investment income; they go in the PAYG instalment section of the statement and are generally due 28 days after the end of each quarter (ATO, PAYG instalments).
A sole trader with no staff is in the instalment system only. A company with employees is usually in both: withholding on the wages it pays, instalments on its own profit. A contractor under a voluntary agreement has withholding taken from invoices, which reduces the instalments they would otherwise pay.
Getting started
One dedicated accountant, working in your Xero, MYOB, QuickBooks or Reckon file, with the 2026-27 tables loaded and the due dates in the pay calendar. FreeMyCloud is not a registered tax or BAS agent: we prepare the figures, and your registered agent or you lodge them.
The payroll file is confirmed to be on the 1 July 2026 tables, and every TFN declaration, threshold claim and study loan flag is checked before the first pay.
Wages, allowances, withholding and super are prepared together for your approval on payday, with the STP pay event ready to send.
Before each activity statement, the STP totals are reconciled to the payroll ledger and the bank, so the pre-filled figures match the money that moved.
The activity statement workpapers, the finalisation check in early July and any annual report go to your registered agent to review and lodge.
Related pages
Frequently asked questions
Before the first payment that is subject to withholding, even if the amount to withhold on it is nil. Register through the Australian Business Register with your ABN, through Online services for business, or through your registered agent (ATO, 24 December 2025).
Small withholders ($25,000 or less a year) pay with the quarterly activity statement: 28 October 2026, 1 March 2027 (28 February is a Sunday), 28 April 2027 and 28 July 2027. Medium withholders ($25,001 to $1 million) pay monthly, on the 21st of the following month or the next business day. Large withholders (more than $1 million) pay within 6 to 8 days of each pay run.
Add allowances and irregular amounts to the normal earnings, ignore the cents, and read the figure from the ATO tax table for that pay period in the column that matches the employee's TFN declaration. Add any study loan amount and subtract any offset or Medicare adjustment claimed. The ATO's tax withheld calculator does this for 2026-27.
Yes. All 15 schedules and 12 tables were reissued on 17 June 2026 for payments from 1 July 2026, because the rate on income between $18,201 and $45,000 fell from 16 cents to 15 cents in the dollar. A payroll file still on the 2025-26 tables withholds too much.
Withhold 47% from a resident and 45% from a foreign resident, ignoring cents, with no tax offsets, Medicare levy adjustment or study loan amount. An employee who has applied for a TFN has 28 days to give it to you before that rate applies.
No. STP reports wages and withholding to the ATO each payday, and the ATO uses that data to pre-fill labels W1 and W2. You still lodge the activity statement and pay the withheld amount by its due date. STP does not move any money.
A penalty equal to the amount that should have been withheld or paid, loss of the deduction for the payment, general interest charge on anything paid late, and for a company, personal liability for each director through a director penalty notice. A voluntary disclosure before an audit begins can reduce the penalties and save the deduction.
PAYG withholding is tax you take out of someone else's pay and send to the ATO. PAYG instalments are prepayments of the tax on your own business and investment income, generally due 28 days after each quarter. A sole trader with no staff is in the instalment system only; a company with employees is usually in both.
This page is general information about PAYG withholding for Australian employers, current as at 1 October 2026. It is not tax, financial or legal advice. FreeMyCloud is not a registered tax or BAS agent and does not lodge on your behalf; we prepare the figures and your registered agent or you lodge them. Rates, thresholds and dates change; check the ATO pages linked above and confirm your own position with your registered tax or BAS agent, who can be found on the Tax Practitioners Board register.
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