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Pay as you go (PAYGinstallments is a system for making regular payments towards your expected annual income tax liability. The installment is calculated on the most recent tax return you have lodged.

Which Option to Use?

You may be able to choose between two options to calculate how much to pay, installment amount or installment rate. If you’re eligible to choose, this will be shown on your first activity statement or installment notice, and you must indicate your choice on the BAS/IAS.

Option 1 – installment amount

The ATO calculates these installment amounts from information reported on your tax return. If you’re eligible for this option, an amount will be shown under Option 1 on your activity statement or instalment notice. This option gives you predictability of the amount so that you can plan your cash flow and is suited for a consisted business.

Option 2 – instalment rate

You can work out the amount yourself using the installment rate we provide. All taxpayers can use this option, and you must use it if you’re a company or super fund that has reported over $2 million of gross business and/or investment income in your most recent tax return. This option is recommended if your business is new or subject to change as it allows for the installment to change with your income.

income tax

AttentionThe option is set for the year based on the Jul – Sept choice!

Once you’ve chosen your option, you must continue to use that option for the remainder of the income year. If you want to change your option, you need to wait until the first quarter in the next income year.
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AttentionVarying the amount or rate?

You can vary the amount of the PAYG installment if you have a reason to suggest that the amount of profit you earn in the current income tax year is different to what was earned in the previous year. You should speak to your accountant before making these changes. If you want to vary the amount you MUST lodge the IAS / BAS before the due date. The lodgements after the due date cant be altered which will result in the ATO seeking to collect the full payment!

The due date for varying your PAYG Installment is

28th October 2015.