PAYG Withholding is the tax you, as an employer, hold back from your employees pay to pay towards their end of year tax obligations. When you start to pay employees, you need to register as a PAYG withholder with the ATO.
Xero will automatically calculate the amount of tax to be held back as part of each payrun.
Having paid the employees their net pay, you then need to make sure you pay the PAYG withheld to the tax office on the due dates.
For smaller startups, you pay this PAYG quarterly (as part of lodging your quarterly Business Activity Statement), but as soon as you are expecting to withhold more than $25k, you actually need to lodge and pay via a monthly Instalment Activity Statement (IAS). You'll reach this threshold pretty quickly, eg for one employee earning $100k, or two employees each on $60k.
Of course, if we're providing payroll services for you, we take of all of this for you :)
More information

Did this answer your question?