PAYG, standing for Pay As You Go, is a withholding tax system in Australia managed by the Australian Taxation Office (ATO). Under PAYG, employers deduct an amount from employee wages or salaries every payroll cycle and remit this amount to the ATO on behalf of the employees. This amount contributes towards the employees' income tax obligations, ensuring individuals are pre-paying their tax obligations as they earn income.

For example, if an employee earns a certain amount in a payroll period, the employer calculates the PAYG withholding according to applicable tax rates and transfers this amount to the ATO. If the employee lodges their tax return at the end of the fiscal year, the PAYG amounts already deducted may offset their overall tax liability, and they may receive a refund if their total deductions exceed their tax owed.

Using a robust month-end reconciliation system like Easy Month End can simplify the management and tracking of PAYG withholdings alongside other financial obligations.