With the current system behavior, the withholding tax amount is currently deducted from the payment. However, as per legal requirement in Australia referencing Documents quoting supplier's ABN | Australian Taxation Office, withholding tax should be calculated and recorded into the system based on gross amount of payment. 

For instance, Vendor A issues an invoice for 100 AUD with a 5% WHT for Buyer B. When making the payment, Buyer B pays Vendor A the full 100 AUD and 5 AUD to the tax authority. This means the 5 AUD withholding liability is recorded as a WHT expense. The offset account for the journal should be Accounts Payable to Tax Authority, to be settled by the end of the month.