Withholding payer number (WPN)

Definition

The withholding payer number (WPN) is a unique identifier issued by the Australian Taxation Office (ATO) to organisations that are required to withhold amounts from payments made to employees, contractors, or other payees for tax purposes. 

What is a withholding payer number?

A withholding payer number is primarily used in business transactions where withholding tax obligations arise. Organisations with a WPN are required to withhold tax from certain payments they make to employees, contractors, suppliers, and other payees. This withholding tax is then paid to the ATO on behalf of the payee.

Withholding tax obligations typically apply to various types of payments, including salaries and wages, superannuation contributions, dividends, interest, royalties, and payments to contractors. The rate of withholding tax and the reporting requirements vary depending on the nature of the payment and the circumstances of the payee.

Organisations that need a WPN must apply to the ATO to obtain one. The application process may involve providing information about the entity’s business activities, financial transactions, and projected withholding tax liabilities. Upon approval, the ATO issues a unique WPN to the organisations.

Furthermore, organisations with a WPN are required to comply with reporting obligations set out by the ATO. Failure to comply with withholding tax obligations, including not obtaining a WPN when required or not withholding tax as required, may result in penalties imposed by the ATO. Penalties can include fines, interest charges, and other enforcement actions.

Example of a withholding payer number

Imagine a freelance consultant providing services to ABC Consulting Services. To ensure compliance with tax regulations, ABC Consulting Services requests a withholding payer number before processing payments for the services.

ABC Consulting Services gets the WPN, which allows them to accurately report and withhold taxes on payments made, ensuring compliance with tax laws and regulations.

With a WPN on file, ABC Consulting Services can process payments while withholding the appropriate amount of taxes, helping both parties fulfil their tax obligations and avoid potential penalties for non-compliance.