Different to PAYG withholding, PAYG instalments is a system that allows you and your business to meet your income tax obligations by making payments at the end of each quarter of the year. These quarterly payments, made to the Australian Tax Office (ATO), go towards the expected income tax obligation accumulated from your business and investment income for the current financial year.

‘PAYG’ simply stands for ‘Pay As You Go’ and is an acronym used to describe the instalments payments associated with both the PAYG instalments and PAYG withholding systems. Read more about the difference systems here.

 

Are you obligated?

The ATO will write to you should you need to make these payments. But generally, it will apply to:

  • Business owners, Investors or Sub-Contractors who earns a certain amount of income; or
  • Australian residents or trusts with a reported gross business or investment income of $4000 or more.

 

Exceptions to these obligations include when:

  • The tax payable on your last notice of assessment is under $1000
  • The notional tax, the estimate of the tax payable excluding capital gains tax, is less than $500; or
  • As an individual, you entitled to the seniors and pensioners tax offset, you are also not required to make PAYG instalments.

 

If you are a company or superfund, instalments need to be paid if:

  • The ATO calculated an instalment rate of above zero for your GST-registered organisation
  • Your notional tax is $500 or more, or your reported income accumulated from business and investment, but excluding capital gains, is $2 million or more.
  • You are the head of a consolidated group.

 

It is important to note however, that there are special rules that apply to PAYG instalments for different business and company structures, trusts, primary producers and consolidated groups. If you are unsure, you are welcome to contact our friendly accountants at Mead Partners for reliable tax advice. Enquire about a free hour of specialised advice here today.

 

DISCLAIMER: The above information is general in nature, and must be tailored to your personal circumstances. The information is provided as a guide only.

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