PAYG (Pay As You Go) withholding is a system used by employers in Australia to withhold income tax from employee payments throughout the year.
This system ensures that employees meet their tax obligations gradually rather than facing a large tax bill at the end of the financial year.
For example, when an employer pays an employee's wages, they will deduct the appropriate amount of PAYG withholding based on the employee's earnings and tax rate before issuing the payment.
This process helps streamline tax collection for the Australian Taxation Office (ATO).
