What is PAYG instalments?

Pay as you go (PAYG) instalments is part of tax planning ahead for your income tax.

It is a system for small business owners and individuals to make regular payments towards their expected tax liability for the current financial year.

Here are some key points to understand about PAYG instalments:

  • How it works: PAYG instalments work by estimating the amount of tax you will owe for the current financial year based on your previous tax return. The ATO (Australian Taxation Office) will send you an instalment notice advising you of your instalment amount and the due date.
  • When to pay: PAYG instalments are paid quarterly and the due dates are typically in October, December, March, and June. However, some taxpayers may have different payment schedules based on their reporting cycle.
  • Calculating the instalment amount: The instalment amount is calculated based on your estimated tax liability for the current financial year. You can choose to calculate your instalment amount using the ATO’s instalment rate or your own estimate.
  • Variations and adjustments: If your business circumstances change, you can vary your instalment amount or apply for a PAYG instalment variation to adjust the amount due. The ATO may also adjust your instalment amount if they believe it is necessary.
  • Consequences of non-payment: If you fail to pay your PAYG instalments on time, you may be charged interest and penalties. Additionally, if you underpay your instalments, you may be required to pay the difference as a lump sum at the end of the financial year.

How to start paying PAYG instalments Voluntarily

It’s a good idea to voluntarily enter into the PAYG instalments system. Use PAYG instalment calculator to work out whether you should enter and how much you’ll need to pay.

Changing the PAYG amount you pay

  • Change your PAYG instalment on your current activity statement
  • Lodge a revised activity statement.

It is important to understand and comply with your PAYG instalment obligations to avoid penalties and ensure that you are meeting your tax obligations. If you are unsure about your PAYG instalment requirements, it is recommended that you seek professional advice.

Should you have further clarity, please do not hesitate to contact one of our experts at the TAXATION.


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