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Pay As You Go (PAYG) Instalment

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 are credited against your assessment to determine whether you owe more tax or are owed a refund.

The ATO will write to entities and individuals who are required to pay PAYG instalments notifying them of an instalment rate.  This is calculated based on information from 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. For further information see Introduction to Annual PAYG.  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 the activity statement and paying any amounts due will be printed on your company's activity statement. This is also the case if you choose the two-instalment option, however this only applies to some primary and special professionals (eg 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.

For further information, see PAYG Instalment Essentials