Completing the labels for option 2
To calculate and report your instalment amount, use the following labels:
If you want to vary your instalment rate, you also use:
T1 - PAYG instalment income
Work out your instalment income for the quarter and write this at T1. If you don't have any instalment income for the period, write '0'.
Include at T1 all ordinary income you earned from your business or investment activities for the quarter (excluding GST) such as:
- goods or services that you sell or supply
- interest received or credited to your bank account
- gross rent
- dividends paid or reinvested on your behalf - don't include imputation credits
- royalties
- gross amount of income where tax has been withheld because you did not provide your tax file number (TFN) or Australian business number (ABN)
- foreign pensions that are assessable in Australia
- your proportion of any partnership or trust income
- withdrawals from farm management deposits - if you make a farm management deposit, your instalment income for that period is reduced
- fuel tax credits.
Don't include at T1 any of the following:
- GST, WET or LCT you collected
- GST credits
- any income - such as salary, wages or income subject to a PAYG voluntary agreement - where amounts have been withheld or should have been withheld (other than income that an amount has been withheld from because you did not provide your TFN or ABN)
- loans received
- owner's capital
- grants under the energy grants credits scheme, including the fuel sales grant, the product stewardship (oil) benefit and the cleaner fuels grant scheme
- capital gains
- amounts transferred between accounts
- imputation (franking) credits.
Don't reduce your instalment income by any allowable deductions you incur in deriving the income. The allowable deductions you claimed in your most recently assessed income tax return will be reflected in your instalment rate calculated by us. You can vary your instalment rate if you think that using the rate provided will result in you paying more (or less) than your expected tax for the income year.
Partnerships and trusts
If you're a partner in a partnership or a beneficiary of a trust, there are special rules to work out the amount to include in your individual instalment income.
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For more information, refer to:
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Superannuation Funds
Superannuation funds need to include any amounts of statutory income. This includes:
- net capital gains
- gross interest
- gross dividends
- gross taxable employer contributions
- gross taxable employee or depositor contributions
- gross distributions from trusts
- gross distributions from partnerships
- gross foreign income.
T2 - Instalment rate
The rate pre-printed at T2 will be either:
- the instalment rate worked out by us
- your most recent varied rate, if you have varied the instalment rate in a previous quarter in the same income year.
If you want to use the rate pre-printed at T2, multiply the amount shown at T1 by this rate. Write the result at T11.
To vary the instalment rate, fill in T3 and T4.
T3 and T4 - varying your instalment rate
If you think that using the pre-printed rate will result in you paying significantly more (or less) tax than your expected tax for the year, you can vary it. To vary your instalment rate, fill in T3 and T4.
There is no need to vary just because your income has gone up or down since your last quarter. The instalment rate is a percentage, so the amount you pay will go up or down in keeping with your income. For example, if your investment and business income for the quarter is zero, the amount you pay will also be zero, regardless of your instalment rate.
Whether or not you vary your PAYG instalment, when your income tax return is processed your PAYG instalments will be credited against your assessment to work out if you owe more tax or are owed a refund.
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If you vary your instalment rate and, as a result, pay less than 85% of your actual tax liability for the instalment period, you may incur general interest charge (GIC). If you use the instalment rate we calculated there is no risk that you will incur the GIC.
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T3 - New varied rate
If you want to vary your instalment rate, write your new rate at T3.
Your varied rate should be:
estimated income tax for the year
estimated instalment income for the year
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x100
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T4 - Reason code for variation
If you vary your instalment rate, choose a reason from the list below that best describes why and write the appropriate code at T4.
Reason
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Code
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Change in investments
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21
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Current business structure not continuing
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22
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Significant change in trading conditions
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23
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Internal business restructure
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24
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Change in legislation or product mix
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25
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Financial market changes
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26
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Use of income tax losses
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27
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Consolidations
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33
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T11 = T1 x T2 (or T1 x T3)
Multiply the amount at T1 by either:
- the instalment rate pre-printed at T2
- if you vary the rate, your new varied rate that you wrote at T3.
Enter the result at T11.
5A - PAYG instalment
Copy the amount at T11 to 5A on your activity statement. This is the amount of your PAYG instalment for the quarter.
Write '0' at 5A instead of your instalment amount if all the following apply:
- Your instalment amount for the period covered by the activity statement is $50 or less.
- You're not claiming a credit at 5B.
- PAYG instalments is your only obligation.
Example
In the first quarter of the income year, you're offered a choice of options. You decide to use option 2 and place an X at option 2.
Your income for the quarter is:
- total sales of $22,000 (including $2,000 GST)
- interest and dividends received of $100.
Your instalment income is $20,100 - that is, $22,000 less $2,000 GST, plus $100 other income. Write the figure 20,100 at T1.
Our calculated instalment rate pre-printed on your activity statement at T2 is 1.7%.
You calculate the instalment amount to pay as follows:
T1 x T2 = $20,100 x 1.7% = $341.70
Write the figure 341 at T11. Copy the figure 341 to 5A.
5B - Credit from PAYG instalment variation
If you have decided to use a varied instalment rate and your varied instalment rate at T3 is less than the instalment rate pre-printed at T2, you may be entitled to a credit from earlier instalments for the same income year.
A credit will only be available if the earlier instalments were worked out using a higher instalment rate.
We offset this credit against any other tax liabilities on your activity statement. This is included in your net tax payment or refund amount at 9 in the Payment or refund? section of your activity statement.
If the instalment you're varying is your first for the income year, you can't claim a credit.
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Even if you're entitled to a credit, you do not have to claim it in your activity statement. If your total instalments for the year are more than the tax on your business and investment income, we will credit you with the overpayment when we assess your annual income tax return.
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If you are entitled to a credit for a previous instalment and want to claim it on your activity statement, write the credit amount at 5B.
Example
We notify you that your instalment rate will be 10% for the first quarter. You multiply this rate by your instalment income of $1,000, resulting in an instalment payment of $100.
For the second quarter, you choose to vary the instalment rate to 5%. You multiply your current instalment income of $1,000 by the varied rate, resulting in an instalment payment of $50.
You then decide to claim a credit to put you in the position that you would have been in if your instalment rate had always been 5%.
Use the following table to calculate the amount of credit you can claim at 5B.
1
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Add up your earlier instalments (the amounts reported at 5A) even if you haven't paid all of them
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$100
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2
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Add up any credits claimed in previous quarters (amounts reported at 5B on a previous activity statement)
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$0
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3
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Subtract the amount at step 2 from step 1
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$100
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4
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Add up instalment income for all earlier quarters of the income year
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$1,000
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5
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Multiply the amount at step 4 by the varied instalment rate
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$1,000 x 5%
=$50
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6
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Subtract the amount at step 5 from the amount at step 3
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$100 - $50
=$50
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7
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If the result is a positive amount, this is the amount of credit that may be claimed at 5B
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$50
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Sections within Pay as you go (PAYG) income tax instalment
Last Modified: Tuesday, 29 January 2013