PAYG INSTALMENTS – Pay some tax along the way

Pay As You Go (PAYG) Instalments is a system for paying instalments during the income year towards your expected tax liability on your business and investment income.

Your actual tax liability is worked out at the end of the income year when your annual income tax return is assessed. Your PAYG instalments that you’ve paid during the year are then credited against your assessment to determine whether you owe more tax or are owed a refund.

How do I know?

The ATO will contact taxpayers required to pay PAYG instalments and notify them of their instalment rate. This is calculated according to information in the taxpayer’s last assessed income tax return.

How often?

PAYG instalments are generally paid quarterly, however some taxpayers pay two instalments a year and some have an annual instalment option. The annual instalment is a single, lump sum payment of your PAYG liability for the year.

Most taxpayers who are eligible pay quarterly.  Each quarter the ATO will send you an activity statement. The due date for lodging this and paying any amounts due will be printed on the statement.  This is also the case if you choose the 2-instalment option, which applies to some primary and special professionals for example, sports professionals and authors.

Work it out yourself

Some companies pay an instalment amount calculated by the ATO; however most companies will work out their own instalment amount based on their instalment rate multiplied by their business and investment income. The main advantage associated with working out your own instalment amount is that your instalments are based on your income as you earn it, rather than a projection based on your previous tax situation.

If you want to know more, call the office on (03) 9585 7555
and ask for Noel or Amanda or emailnoel@noelmay.com.au