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 for the year are credited against your assessment to determine whether you owe more tax or are owed a refund.
The ATO will contact entities and individuals who are required to pay PAYG instalments, notifying them of their instalment rate. This is calculated according to information in the last assessed income tax return.
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.
If you are not eligible to pay an annual instalment, you can pay PAYG instalments 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 (e.g. sports professionals and authors).
Some entities and individuals pay an instalment amount calculated by the ATO, but most companies work out their own instalment amount based on their instalment rate multiplied by their business and investment income. The main advantage of working out your own instalment amount is that your instalments are based on your income as you earn it, instead of a projection based on your previous tax situation.
We normally do not lodge the PAYG instalment form for our clients, because once we lodge it electronically, the client will no longer receive the paper format PAYG instalment form in mail. For more info on why we do not lodge the PAYG form for the client, please see the ATO brochure.
Vary amount on PAYG Installment payment
As discussed above, the ATO uses previous year’s income tax expense to calculate PAYG for current Financial Year. However, there are some cases that the SMSF does not generate as much income as it did in prior years, Trustees can vary the PAYG amount and submit to the ATO about the changes in the SMSF.
For more info how to vary the PAYG amount, please see the video below:
Setup Trustee access to Online Services for Business
Business Online Services system allows Trustees to manage their SMSF, PAYG and other tax affairs. The Trustee can access digital communications from the ATO and lodge PAYG activity statements on Business Online Services system as well. For more info on how to link your SMSF to Online Services for Business, please follow the steps here.
Q&A (click on the question to reveal the answer)
A: Yes, you are able to vary the PAYG for your Fund following the steps below:
- Setup Digital Identity
- Log into ATO RAM using your Digital Identity and connect to your SMSF fund (it will automatically populate with a list of eligible SMSF trusts based on if you are trustee of a SMSF Trust)
- Log into ATO online services for businesses and your SMSF will be listed there
- Then go into activity statements, and you will see the list of activity statements for your SMSF. You can vary them if they are still available
A: Yes, you are able to make a single payment rather than quarterly or monthly payments to the tax office through the PAYG system.
A: There are certain criteria to be met, in order to pay annually:
- The Funds latest tax assessment has less than $8,000.
- The Fund is GST registered and pays GST annually.
A: If eligible, you may choose for the Fund to pay PAYG annually. The Trustees of the Fund may contact the Tax Office directly to change the PAYG to an annual basis, alternatively, if you are a client of Superannuation Warehouse we can change this through the Tax Office.
- Please note – If the Trustee has already paid the first instalment notice towards PAYG, then the action for an Annual PAYG will not come in to effect if requested until the following financial year commences. See more here.
