Why PAYG Compliance Matters
The ATO takes PAYG withholding compliance seriously. As an employer, you are effectively acting as a collector of tax on the government's behalf. When you withhold amounts from your employees' wages, those funds legally belong to the ATO — not to your business. Mishandling these obligations can trigger penalties, interest charges, and in serious cases, director penalty notices (DPNs).
Key PAYG Withholding Deadlines
Monthly and Quarterly BAS Lodgement
Withheld amounts must be reported and paid through your Business Activity Statement (BAS) or Instalment Activity Statement (IAS). Deadlines are:
- Quarterly lodgers: 28 days after the end of each quarter (28 October, 28 February, 28 April, 28 July)
- Monthly lodgers: 21st of the following month
- Large withholder payers: As per the ATO's electronic payment schedule — often within days of payroll
If the due date falls on a weekend or public holiday, you generally have until the next business day.
STP Finalisation Deadline
Employers using Single Touch Payroll must finalise employee income data by 14 July each year. Employers with closely held payees (such as family members employed in a family business) have until 30 September. Missing this date means employees may not be able to lodge their tax returns on time.
Payment Summary Annual Report (Pre-STP Employers)
Employers who are exempt from STP and still issue paper payment summaries must lodge their Payment Summary Annual Report with the ATO by 14 August each year and provide summaries to employees by 14 July.
Types of Penalties
Failure to Lodge (FTL) Penalty
If you fail to lodge a BAS, IAS, or STP finalisation on time, the ATO may apply a Failure to Lodge penalty. This is calculated as one penalty unit for each 28-day period the lodgement is overdue, up to a maximum of five penalty units. The value of a penalty unit is updated periodically — check the ATO website for the current rate.
General Interest Charge (GIC)
If you pay amounts late, the ATO charges General Interest Charge (GIC) on the outstanding balance from the due date until the date of payment. GIC is compounded daily, so even short delays can accumulate.
Shortfall Penalties
If you withhold less than the required amount and there's a tax shortfall, the ATO can apply shortfall penalties. These range from 25% to 75% of the shortfall depending on whether the mistake was due to carelessness, recklessness, or intentional disregard of the law.
Director Penalty Notices (DPNs)
Directors of companies can be held personally liable for unpaid PAYG withholding through a Director Penalty Notice. This is a serious mechanism the ATO uses to recover amounts that haven't been paid or reported. Once a lockdown DPN is issued, directors cannot avoid the penalty by placing the company into administration.
How to Stay Compliant
- Use STP-enabled payroll software to automate reporting and reduce manual errors.
- Set calendar reminders for all BAS and IAS lodgement due dates.
- Reconcile payroll accounts monthly to catch discrepancies early.
- Engage a registered tax or BAS agent — they often have extended lodgement due dates.
- Contact the ATO proactively if you're struggling to pay — payment plans are available and are far better than ignoring the debt.
What to Do If You've Missed a Deadline
Don't ignore it. Lodge as soon as possible and consider calling the ATO to explain the circumstances. The ATO does have the ability to remit (waive) penalties in genuine cases of hardship or honest mistakes — but you need to ask. Ignoring overdue obligations only makes the situation worse.