PAYG Instalments

Pay As You GO (PAYG) Instalments is a system for paying regular instalment payments towards your expected annual income tax liability. PAYG Instalments only apply if you earn business and/or investment income over a certain threshold. The Australian Taxations Office (ATO) will notify you if you need to start paying PAYG Instalments. If you are required to pay PAYG Instalments you still need to lodge an Income Tax Return. Your PAYG Instalments are taken into account when calculating whether you owe more tax or are owed a refund.

PAYG Instalments can be varied for both entities and individuals if they believe the instalment rate, or the ATO calculated instalment, will result in paying more or less than the expected tax liability for the year.

Individuals are generally required to pay their PAYG Instalments quarterly. Generally, the ATO will enter you into the PAYG Instalment system if:

  • You have reported $4,000 or more of gross business and investment income on your last Income Tax Return
  • Your adjusted balance of assessment on your last assessed tax return is more than $1,000
  • Your notional tax is more than $500
  • You are not entitled to the Seniors and pensioners tax offset

The $4,000 income threshold does not include salary or wage income from which tax has already been withheld.

Partnerships and trusts are not required to pay PAYG Instalments. However the partners and beneficiaries of such entities have special rules applying to them when calculating their own instalments.

Companies with an annual turnover above a certain threshold are required to pay PAYG Instalments on a monthly basis. The threshold is $1 billion from 1 January 2014, $100 million from 1 January 2015 and $20 million from 1 January 2016. Other companies are required to pay quarterly instalments. Companies may also elect to pay an annual instalment if they meet certain criteria.

Superannuation Fund are generally required to pay their PAYG Instlaments on a quarterly basis. Superannuation Funds can also elect to pay an annual instalment if they meet certain criteria.