Tax Facts - PAYG Instalments

Pay as you go (PAYG) instalments is a system for making regular payments towards your expected annual income tax liability. It only applies to you if you earn business and/or investment income over a certain amount.

If you pay PAYG instalments, you still need to lodge an annual tax return.

ATO will notify you or your tax agent if you need to start paying by instalments under the PAYG instalment system. Before your PAYG instalments are due, ATO will also send you or your tax agent an activity statement or instalment notice, depending on your circumstances.

Who need to pay PAYG instalments

ATO work out whether you need to pay PAYG instalments based on information you reported in your latest income tax return. If you are required to pay instalments, ATO will notify your or your tax agent.

Generally, for individuals and trusts you will need to pay instalments if you reported $4,000 or more ($1 or more if you're not a resident) of gross business and/or investment income in your latest tax return, unless one of the following applies:

• the tax payable on your latest notice of assessment is less than $1,000

• your notional tax is less than $500, or

• you are entitled to the seniors and pensioners tax offset.

If you're a company or super fund, you'll generally need to pay instalments if:

• the instalment rate ATO calculate is more than zero percent and your notional tax is $500 or more

• business and/or investment income (excluding capital gains) in your most recent income tax assessment is $2 million or more, or

• you're the head of a consolidated group.

Notional tax is an estimate of the tax payable for the financial year, excluding capital gains tax.

Special rules apply to PAYG instalments for partnerships, trusts, companies, primary producers and consolidated groups.

If you have any question about how to start paying instalments, how to vary the amount you pay, and how to exit PAYG instalments, you can always book a consulting meeting with us.