What happens if an employer does not withhold tax?
Learn why PAYG withholding compliance matters and what employers should check if amounts were not withheld correctly.
Summary
If an employer is required to withhold tax and does not do so correctly, there may be ATO compliance issues. Employers should review PAYG withholding obligations and correct mistakes as soon as possible.
What this means
PAYG withholding obligations apply to certain payments. Not withholding correctly can affect reporting, payment obligations, and deductibility of some payments in certain circumstances.
The exact consequences depend on the facts, so employers should check ATO guidance and seek advice where needed.
Typical actions
- Check whether PAYG withholding should have applied.
- Review payroll records and amounts withheld.
- Correct reporting or payment errors promptly.
- Contact the ATO or a registered tax agent if needed.
- Improve payroll processes to avoid repeat errors.
Official ATO sources
Last checked: 20 June 2026
PAYG withholding
Explains when withholding applies and how it is reported.
Obligations when people work for you
Explains employer obligations for workers.
Payroll governance for employers
Explains good payroll governance for employers.
Related questions
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Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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