Overview of Recent PAYG Withholding Variation Instruments
In early 2026, several Legislative Instruments (LIs) have come into force or been updated to reduce withholding obligations to nil under certain conditions. (pwc.com.au) Noteworthy are:
- Payments to Indigenous Artists who operate in certain remote “Zone A” areas and do not quote an ABN.
- Insurance and compensation payments where ABN is not quoted.
- Certain payments to religious practitioners, including removing requirement for non-institution payers to provide payment summaries.
- Payments by company directors/office holders where the amount is passed to another entity.
These LIs replace older instruments and respond to sunset-dated provisions as of 1 April 2026. (pwc.com.au)
Who’s Affected & Practical Impacts
These changes matter particularly for:
- Non-quoting ABN payees in specific categories (artists, compensation recipients). Under previous law, payers withheld tax at default ABN‐withholding rates if no ABN was supplied. Under the new LIs, no withholding is required.
- Religious practitioners, especially when dealing with small organisations or individual payers who may not be religious institutions themselves. They no longer need to issue payment summaries for some payments.
- Directors/office holders passing payments to their entities, simplifying administrative burden.
Compliance Advice & Example
Take these steps now:
- Review your classification: Are you making payments in any of the changed categories? If so, determine whether you need to withhold, or whether the variation exempts you.
- Update contracts and policies: Ensure payment agreements and contractor contracts reference the requirement (or exemption) for ABN quoting.
- Audit payroll and reporting systems: Your payroll software must be configured for accurate STP reporting, especially for religious practitioners.
Example
A regional Indigenous artist without an ABN performs work in Zone A. Under previous rules, the payer withheld 47% or default ABN withholding rate. Now, under the legislative instrument, withholding must be nil. However, the artist should still provide invoices, receipts, and ensure correct classification of revenue.
Key Dates & Deadlines
- The varied LIs take effect March 2026 and have replaced earlier instruments that expired or sunsetted 1 April 2026. (pwc.com.au)
- Entities should ensure STP reporting and payroll systems comply with ongoing obligations. Non-compliance could result in penalties.
Actionable Takeaways
- If you're a payer, identify all payment categories in your business and verify whether variations apply.
- If you're a recipient (artist, religious practitioner, etc.), keep ABN records clear, and monitor any eligibility for offsets or reporting obligations.
- Seek professional advice if you are unsure whether your earnings or payments fall under a variation.
These LIs streamline withholding for certain payees—but understanding which rules apply to you can help avoid unnecessary withholding or compliance risk.