How to vary pay as you go (PAYG) instalments

Step 4: work out your varied instalment rate

To work out your varied instalment rate as a percentage (to two decimal places), divide your estimated tax (step 3) by your estimated income (step 2) and multiply by 100.

The formula looks like this:

     estimated income tax for the year (step 3)       x  100 = xx.xx
estimated instalment income for the year (step 2)

Example 2 Harmander is a sole trader. We have calculated his instalment rate at 16.84%. He uses this instalment rate in the first quarter (1 July to 30 September) and second quarter (1 October to 31 December) to work out his instalment amount. Harmander decides to vary his instalment rate for the third quarter because increased competition has reduced the profit margin on his sales. He estimates that his income tax for business and investment income for the year will be $10,125 and his instalment income for the year will be $82,480. Harmander works out his varied instalment rate as follows: $10,125 x 100 = 12.27% $82,480

You may be liable to pay the GIC if your varied instalment rate is less than 85% of the instalment rate that would have covered your actual liability for the income year. We will work out that instalment rate when we assess your income tax return based on both:

• your business and investment income
• the tax attributable to that income (excluding capital gains) for the year.

Sections within How to vary your instalment rate (option 2)

• Step 1: decide whether you want to vary
• Step 2: estimate your business and investment income (also known as instalment income) for the year
• Step 3: estimate the tax on your business and investment income for the year
• Step 4: work out your varied instalment rate
• Step 5: work out any credit from previous instalments in the current income year
• Step 6: complete your activity statement
• Step 7: lodge and pay