You can download a printable version of Varying your GST instalments (248KB) in Portable Document Format (PDF).
You may be eligible to pay GST by instalments if:
- you are a small business with an annual turnover (including the turnover of your related entities) of less than $2 million, or
- you are not operating a business, but are carrying on an enterprise with a GST turnover of $2 million or less.
In addition, the following criteria must be met in order to be eligible to use GST instalments:
- you do not currently lodge your activity statement monthly for GST purposes
- you have lodged an activity statement for at least two quarters (or four months if you previously lodged your activity statement monthly)
- you have lodged all your previous activity statements, and
- you are not in a net GST refund position.
We advise businesses eligible to use the instalments option of their instalment amount. If you think you are eligible but have not been advised of an instalment amount, contact us on 13 28 66.
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For more information about the instalments option, including eligibility requirements, refer to Quarterly GST options (NAT 4149).
For more information on accessing GST and other small business concessions, and calculating your annual turnover, refer to Small business concessions at www.ato.gov.au/sbconcessions
For more information on how to calculate your GST turnover for purposes such as registration, refer to GST for small business (NAT 3014).
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You can vary your instalment amount if you think that the total of your advised instalment amounts will be more (or less) than your actual GST liability for the year. You can vary your instalment amount for any quarter but you cannot vary it below zero. Penalties may apply if your varied instalment amount or your estimate of your annual GST liability is too low. You will not incur any penalty if each quarter you pay the instalment amount advised by the ATO and you do not vary in any quarter. This is the case even if the total of these instalments is less than your actual GST liability for the year.
To vary your instalment amount for a quarter you should:
- work out your estimated annual GST liability. If you have a wine equalisation tax or luxury car tax liability, you need to take this into account when working out your estimated annual GST liability
- compare the total amount you would pay for the year using your advised instalment amount each quarter with your estimated annual GST liability. If there is a difference, you may wish to vary your instalment amount
- work out your varied instalment amount for the quarter, and
- write your varied instalment amount and your estimated annual GST liability in the appropriate boxes on your activity statement.
Quarter 1
For the quarter ending 30 September, the varied instalment amount should be your estimated annual GST liability × 25%.
Quarter 2
For the quarter ending 31 December, the varied instalment amount should be your estimated annual GST liability × 50%, less the GST instalments already paid or payable for the year.
Quarter 3
For the quarter ending 31 March, the varied instalment amount should be your estimated annual GST liability × 75%, less the GST instalments already paid or payable for the year.
Quarter 4
For the quarter ending 30 June, the varied instalment amount should be your estimated annual GST liability × 100%, less the GST instalments already paid or payable for the year.
You should mark your variation on the appropriate box in your activity statement and indicate your reason for varying by choosing one of the reason codes from the table below.
The reason codes cover a number of obligations reported on the activity statement - GST, pay as you go instalments and fringe benefits tax. If you are varying your GST instalment amount, you would use reason code 22, 23, 24, 25 or 26.
Choose the reason code that best describes your reason for varying your GST instalment amount and write it at the appropriate box on your new activity statement.
Variation reason codes
Code
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Reason
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Reason description
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21
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Change in investments
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Your investment strategy or policy has changed and this will significantly affect your annual tax liability. For example, the sale or purchase of investments such as shares or residential property, or the use of investments for private purposes.
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22 *
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Current business structure not continuing
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Your current business has stopped trading or has changed its structure. For example, you have permanently closed or sold your business, it has stopped trading because of a merger or takeover, or it has gone into bankruptcy or liquidation or been placed in the hands of a receiver/manager.
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23 *
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Significant change in trading conditions
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Abnormal transactions relating to your business income or expenses will significantly affect your annual tax liability. For example, you have bought or sold a major piece of machinery or your trading conditions have been affected by local or global competition.
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24 *
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Internal business restructure
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You have restructured your business. For example, it has undergone an expansion or contraction, and this will significantly affect your annual tax liability.
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25 *
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Change in legislation or product mix
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A change in legislation, or in the product mix of your business, will significantly change your annual tax liability.
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26 *
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Financial market changes
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Your business has been affected by domestic or foreign financial market changes. This reason code is for businesses involved in financial market trading, including those whose income is affected by changes in financial products, for example, banks, finance and insurance businesses.
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27
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Use of income tax losses
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You will be using income tax losses, including capital losses transferred from another entity, that will significantly affect your annual tax liability.
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30
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Change in fringe benefits for employees
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You have changed your fringe benefits arrangements for employees. For example, you no longer provide fringe benefits, or you have reduced fringe benefits and increased salary.
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31
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Change in employees with fringe benefits
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You have changed the number of employees receiving fringe benefits or there is an increase in employee contributions.
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32
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Fringe benefits rebate now claimed
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You are now claiming the fringe benefits rebate.
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* Use one of these reason codes if you are varying your GST instalment amount.
If you vary your advised instalment amount for a quarter, you will have a varied instalment amount for each of the remaining quarters of the financial year. This varied instalment amount is either:
- 25% of the estimated annual GST liability on which you based your varied instalment amount for the previous quarter if that estimate has not changed, or
- a new varied instalment amount for the quarter if your estimated annual GST liability has changed.
For each quarter you vary your instalment amount, you need to write your new estimated annual GST liability on your activity statement.
Example 1
Les is a plumber who is eligible to pay GST by instalments. He chooses to pay by instalments from the September 2006 quarter. Les pays the advised amount of $20,000 for the September quarter, but he decides to vary his December 2006 quarter instalment amount. This is because by the time that instalment is due, Les estimates his GST liability for the year to be $70,000.
Les works out his varied instalment amount for the December quarter as follows:
Estimated annual GST liability
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$70,000
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Amount to be paid by December quarter ($70 000 x 50%)
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$35,000
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less GST instalment amount paid for September quarter
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$20,000
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Varied instalment amount for December quarter
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$15,000
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Les writes $15,000 as his varied instalment amount and $70,000 as his estimated annual GST liability on his December quarter activity statement, and also provides a reason code.
Example 2
For the March 2007 quarter, Les may either pay 25% of his annual estimate from the previous quarter if this is still what he estimates his annual GST liability to be, or he may choose to vary this amount. As Les has not changed his estimated annual GST liability of $70,000, his instalment amount for the March quarter is $17,500 (that is, 25% of $70,000).
For the June 2007 quarter, Les estimates that his GST liability for the year will be $73,000. He works out his varied instalment amount for the June quarter as follows:
Estimated annual GST liability
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$73,000
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Amount to be paid by June quarter ($73,000 × 100%)
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$73,000
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less GST instalment amounts paid for previous quarters
($20,000 + $15,000 + $17,500)
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$52,500
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Varied instalment amount for June quarter
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$20,500
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Les writes $20,500 as his varied instalment amount and $73,000 as his estimated annual GST liability on his June quarter activity statement, and also provides a reason code.
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For more information on using the GST instalment options for primary producers and special professionals, refer to GST instalments (NAT 4238).
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If you are new business and you become eligible to use the instalments option part way through a financial year, you can choose to use this option when you first become eligible.
If you choose the instalments option part way through a year, you take into account any GST net amounts you paid or were refunded in earlier quarters when working out your varied instalment amount.
Example 3
Lyn is a landscape designer and registers her business for GST in July. She receives a net GST refund of $2,000 for the September quarter and pays a net GST amount of $13,000 for the December quarter. Lyn becomes eligible to use the instalments option for the March quarter and is notified that her instalment amount for the March quarter is $13,000.
As Lyn estimates her annual GST liability to be $30,000, she decides to vary her instalment amount for the March quarter, as follows:
Estimated annual GST liability
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$30,000
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Amount to be paid by March quarter ($30,000 x 75%)
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$22,500
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less the net GST amount paid for the September and December quarters ($13,000 - $2,000)
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$11,000
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Varied instalment amount for March quarter
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$11,500
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Lyn writes $11,500 as her varied instalment amount and $30,000 as her estimated annual GST liability on her March quarter activity statement, and also provides a reason code.
If you vary your instalment amount, you may have a shortfall in:
- the total of your instalments for the year
- the estimate of your annual GST liability on which you based your varied instalment amount for any quarter, or
- your varied instalment amount for a quarter.
A penalty may apply to a shortfall, but for a particular quarter the penalty will apply to only one type of shortfall.
A penalty may apply to a shortfall for a quarter in which you varied your instalment amount if:
- the total of your GST instalments (and any net GST amounts) is less than 85% of your actual GST liability for the year
- you did not have the first type of shortfall for the quarter, and:
- the estimated annual GST liability on which you base your varied instalment amount for a quarter is less than 85% of your actual GST liability for the year, and
- your varied instalment amount for that quarter is less than or equal to 25% of your actual GST liability for the year.
- you did not have the first or second type of shortfall for the quarter, and:
- your varied instalment amount, together with your GST instalments (and any net amounts) paid or payable for any previous quarters in the year, is less than the following percentage of your estimated GST liability for the year:
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September quarter
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25%
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December quarter
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50%
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March quarter
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75%
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June quarter
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100%
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If a penalty applies because you varied an instalment amount and it was too low, the shortfall will be reduced if you paid any extra amounts in a later quarter.
In certain circumstances the Commissioner of Taxation can use discretion to reduce penalties in whole or in part. For example, if you incur a penalty but can show that your estimated annual GST liability was fair and reasonable and was incorrect only because of an unexpected upturn in sales, the Commissioner may decide to reduce the penalty.
For more information about varying your GST instalment amount:
- visit our website at www.ato.gov.au
- phone us on 13 28 66
- write to us at
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640.
If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.
Last Modified: Wednesday, 2 May 2012