Tax Facts – PAYG Installments
(Pay As You Go) PAYG Installments is a system for paying installments 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 installments for the year are credited against your assessment to determine whether you owe more tax or are owed a refund.
The ATO will contact companies required to pay PAYG installments, notifying them of their installment rate. This is calculated according to information in the company’s last assessed income tax return.
PAYG installments are generally paid quarterly, however some taxpayers pay two installments a year and some have an annual installment option. The annual installment is a single, lump sum payment of your PAYG liability for the year. For more information see the PAYG Annual Installment Fact Sheet. If your company is not eligible to pay an annual installment, you can pay PAYG installments quarterly. Each quarter the ATO will send you an activity statement. The due date for lodging this and paying any amounts due will be printed on the statement. This is also the case if you choose the two installment option, which applies to some primary and special professionals (e.g. sports professionals and authors).
Some companies pay an installment amount calculated by the ATO, but most companies work out their own installment amount based on their installment rate multiplied by their business and investment income. The main advantage of working out your own installment amount is that your installments are based on your income as you earn it, instead of a projection based on your previous tax situation.