What is the PAYG instalments system?

The Pay As You Go (PAYG) instalments system is a program where regular payments are made to prepay tax on expected annual income tax liability on business or investment income. It only applies if you earn income over a certain amount.

PAYG instalments are based on tax payable as per your previous year’s tax return lodged. Individuals (residents) and trusts will need to pay instalments if they reported $4,000 or more of gross business and investment income in their previous tax return with some exceptions:

• The tax payable on your latest notice of assessment is less than $1,000
• Your notional tax is less than $500
• You are entitled to the seniors and pensioners tax offset
Non-residents must pay instalments if they reported $1 or more of gross business and/or investment income.

There are two options to calculate the amount to pay: the first option is to calculate by instalment amount, where the amount payable is calculated by the ATO. The second option allows you to calculate the amount yourself using the instalment rate provided by the ATO and your instalment income.

If you believe your instalment rate or amount does not represent your current circumstances, you can make it higher or lower by varying it.

For assistance with lodging or varying PAYG Instalment notices, contact us at FAJ on (08) 93355211.

Author: Elena Grishna
Email: elena@faj.com.au