PAYG instalments: exploratory research 2011
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The pay as you go (PAYG) instalments system was implemented on 1 July 2000 and generally requires those taxpayers with investment and/or business income to pay instalments on their expected income tax liabilities.
In March 2011, we engaged independent research company, Colmar Brunton Social Research, to conduct qualitative and quantitative research to explore the PAYG instalments experience of individual and business taxpayers and tax and Business Activity Statement (BAS) agents.
This research is part of an ongoing program that seeks to identify ways in which we can improve or simplify compliance processes for the community.
The research provided key insights into the journey individual and business taxpayers and tax practitioners take from entry into the system, through to how PAYG instalments obligations are being met.
Key findings from the survey were:
- Overall, the PAYG instalments system is working well for the majority of respondents and there is no evidence that any major change is required.
- The majority of those surveyed indicated they find the PAYG instalment system reasonably straightforward to comply with, at least after an initial learning period on entry to the system.
- For businesses and individual taxpayers our website is a key information channel.
- The majority of respondents indicated they understand the concept that PAYG instalments represents a part payment towards their total tax liability for the financial year.
- Most of those surveyed described the process of meeting their ongoing PAYG instalments obligations as easy (31% very easy, 45% fairly easy) with only 10% finding the process difficult.
- A majority (69%) reported they either manage their PAYG instalments affairs independently or with occasional external advice or support.
- Awareness of the ability to vary PAYG instalments payments was higher among business operators (around 80%) than individual taxpayers (67%). Around half of the business respondents reported they had previously made a variation, whereas only 17% of individuals had done so.
- Awareness of the ability to seek refunds via activity statements of PAYG instalments amounts, when circumstances change considerably over the financial year, was moderate at 57%.
- Awareness of the ability to leave the system altogether was also moderate at 61% overall.
- For the majority of respondents, the PAYG instalments system ultimately evolves to a relatively 'low involvement' part of their tax affairs. Once people have mastered the basics they continue to use an approach that works in a pragmatic and economical manner.
- Entry to the system, on the other hand, can be a confusing time. This is especially the case for individual taxpayers for whom the PAYG instalments system represents a significant increase in reporting and payment obligations from their regular income tax preparation and lodgment experience.
Findings from the research support the work we are doing in line with whole-of-government service delivery principles and our support of small businesses.
To further improve taxpayers' experiences, a number of initiatives have been implemented or are soon to commence, including:
- Reviewing the content of our letters, considering feedback from taxpayers and tax agents, to improve clarity of information and/or advice and to ensure there is no duplication of information already available (for example, on activity statements). A working group has been established comprising ATO staff and representatives of the Accounting Working Group.
- A strategy was implemented in September 2012 to promote voluntary entry into the PAYG instalments system that will be supported by education material aimed at new Australian Business Number registrants as part of an existing information pack and also liaison with intermediaries, such as business enterprise centres.
- Implementation of the new PAYG instalments computer system in January 2012 has delivered a number of benefits including
- real-time taxpayer information
- ability of ATO staff to view correspondence that has been sent to the taxpayer: enables us to address concerns raised in real time.
- An education strategy to better explain to people new to the system the relationship between the PAYG instalments and income tax systems, how people are drawn into PAYG instalments and the flexibility that the system offers.
For more information about the PAYG instalments system visit us at www.ato.gov.au/paygi
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We apologise for the delay in publishing this report.