Register for Pay As You Go (PAYG) instalments
PAYG instalments explained
PAYG instalments is a system for making payments each quarter towards your expected income tax obligation on your business and investment income for the current financial year.
PAYG instalments are generally paid by business owners, investors and sub-contractors who earn a certain amount of income.
The Australian Taxation Office (ATO) will write to tell you if you must pay PAYG instalments.
PAYG instalments allow you and your business to meet your income tax obligations.
PAYG changes explained
Changes to Pay As You Go (PAYG) instalment thresholds have been introduced to help save you and your business, time and money.
Changes to PAYG instalments from 1 July 2014 include:
an increase to PAYG instalment thresholds, which may mean you no longer need to pay an instalment. Threshold changes include:
business or investment income increases from $2000 to $4000
adjusted balance of assessment increases from $500 to $1000
notional tax increases from $250 to $500.
no longer being required to remain in the PAYG system if you have a zero instalment rate, even if you're registered for Goods and Services Tax (GST)
automatic removal from the PAYG instalments system if you no longer meet the PAYG instalment thresholds - the ATO will let you know if this happens.
Who monthly PAYG instalments apply to
You will be required to make PAYG instalments monthly rather than quarterly if you have a base assessment instalment income of $20 million or more and you are a:
corporate tax entity (company, corporate limited partnership, corporate unit trust or public trading trust)
superannuation fund
trust
sole trader
large investor.
Entities that lodge their GST quarterly or on an annual basis, will only be required to pay monthly if their threshold is equal to or exceeds $100 million.
PAYG instalments VS PAYG withholding explained
It's important to note that PAYG instalments are different to PAYG withholding.
If you're an employer, PAYG withholding is your legal requirement to keep a portion of payments made to your employees and other businesses, which you then pay to the ATO.
You complete this on your employee's behalf by withholding some of their pay as tax. Your employees can make a claim against the amount withheld at the end of the financial year.
You may also have to withhold tax from payments you make to other workers, such as contractors. For more information on meeting your requirements as en employer, visit our page on Register for PAYG withholding.
What to do
If you still wish to pay instalments towards your end of year tax income, you can voluntarily re-enter PAYG instalments by contacting the ATO on 13 28 61.
