Why do I have to pay quarterly tax instalments?
May 26th 2023As a new business or investor, you may think that taxes are always paid annually, however an unexpected letter or email from the ATO may tell you otherwise…
Introducing Pay As You Go Instalments (PAYGI)!
What are they?
PAYG instalments are regular repayments of tax on your business and investment income. The instalments are required to be paid every 3 months and essentially mean you are prepaying tax that will come off your end of year tax return which helps avoid one large lump sum payment.
At the end of the financial year, if you did end up overpaying tax via instalments, you will receive a refund for the excess. And if your instalments didn’t quite cover the total tax, you will be required to pay the difference upon lodgement.
When do I have to pay them?
If you are an individual (including a sole trader) or trust, you will automatically enter the PAYG instalments system if you have all of the following:
- instalment income from your latest tax return of $4,000 or more
- tax payable on your latest notice of assessment of $1,000 or more
- estimated (notional) tax of $500 or more.
Can the instalments be varied?
As PAYG instalments are prepayments of your expected income tax for the year, you have the ability to vary the instalments (to be less or more). This is generally the case when your business or financial situation has changed and thus, your expected tax may also change.
Reach out for a complimentary consultation and let us help make your life easier.
