If you have recently received a letter from the ATO about PAYG Instalments, you might be wondering how it can impact your business tax obligations. Pay As You Go Instalment helps individuals and businesses manage their income tax payments throughout the year by dividing them into quarterly instalments. At the end of the financial year, it can help you avoid a large tax bill and impact your cash flow. In this blog, we’ll share information on PAYG instalments and how they work.
What is PAYG Instalment?
You can handle your income tax payments using PAYG instalments. A PAYG income tax instalment represents a prepayment of your anticipated tax on investment and business income. In simple words, you may have to make PAYG instalments when you earn investment and business income.
You file and pay your PAYG instalments using your instalment notice or activity statement. If you receive:
- an activity statement, file it to report your PAYG instalment
- activity statement, you are not required to complete or file, unless you wish to change the amount. You are liable to pay the amount mentioned on the notice.
PAYG Instalment Due Dates
At the end of each quarter, you will receive your activity statement or PAYG instalment notice from the ATO. It will include the due date.
Due dates for quarterly instalments:
| Quarter | Period | Due date |
| 1 | July–September | 28 October |
| 2 | October–December | 28 February |
| 3 | January–March | 28 April |
| 4 | April–June | 28 July |
If you receive an activity statement:
- Lodging online: You may be eligible for a 2-week extension to file and pay.
- Paying GST monthly: Your due date is the 21st of each month, and the 2-week extension does not apply to you.
If you receive an instalment notice:
- You are not required to lodge it—just pay the amount shown by the due date.
Two-instalments
You must pay:
- 75% of your total annual PAYG instalments by 28 April
- The remaining 25% by 28 July
Use the instalment amounts listed on your activity statement. These depend on your most recent tax return.
What If You Use a Tax Agent?
If you use a tax agent:
- Your annual instalment will be due by 21 October.
- You are required to pay it before filing your tax return to ensure it’s correctly credited in your income tax assessment.
It is crucial to check the qualifications and experience of a tax agent when searching for a ‘tax accountant for small business near me’.
If your return is lodged by your tax accountant prior to 21 October:
- Pay the amount mentioned on your PAYG instalment notice by 21 October.
- Do not file the instalment notice or alter the instalment amount.
What are the Record-Keeping Requirements for PAYG Instalments?
You are required to record and maintain essential information about your pay-as-you-go instalment. You are required to keep calculations of PAYG instalment amounts and payment receipts or bank statements for payments of your instalment notice or business activity statement (BAS). You must keep these records for five years from the date they were prepared or obtained, or from when the related transactions or actions were completed, whichever is later.
For record-keeping, it would be better to choose bookkeeping services in Melbourne. It is essential to maintain records long enough to cover the period of review for an assessment that utilises information from the record. When your assessment is adjusted, the review period for that adjusted assessment begins the day after the ATO notifies you of the amended assessment.
When Can You Stop Paying PAYG Instalments?
If you are no longer earning investment or business income, you will be allowed to exit PAYG instalments. On the other hand, you will be automatically removed by the ATO from PAYG instalments if you meet certain conditions.
Conclusion
It is crucial to understand PAYG instalments and how they work to stay on top of PAYG instalments. If you find it difficult to manage PAYG instalments or other tax obligations, it would be better to reach out to Reliable Melbourne Accountants.