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  • How to vary your instalment amount (option 1)

    If you pay using the amount we calculate for you, your PAYG instalment will be shown at T7 (ATO instalment amount) on your activity statement or instalment notice.

    This amount is calculated based on your notional tax (an estimate of your tax payable for the year based on your last tax return and current income tax rates), and it is adjusted for likely increases in your business and/or investment income (based on growth in Australia's Gross domestic product (GDP).

    If you varied your instalment amount in a previous quarter of the financial year, the amount shown at T7 will be your varied instalment amount.

    If you calculate your instalments using the instalment rate × instalment income method (option 2 on your activity statement), go to How to vary your instalment rate (option 2).

    Calculating your varied amount

    Use the following steps to calculate your variation.

    Step 1: Estimate your instalment income and the tax on this income for the year

    Your instalment income is generally your gross business and investment income, excluding any capital gains.

    You can estimate the tax on your instalment income for the year by using the PAYG instalments calculator or our instructions.

    Step 2: Work out how much of your estimated tax to pay for this instalment

    The amount you pay depends on the quarter you are paying for, and how much you have paid in previous quarters.

    If you pay four quarterly instalments per year, use Table 1 to work out how much to pay. If you started paying instalments for the first time during the second, third or fourth quarter of the income year, you’ll pay a lesser amount. Use Table 2, Table 3 or Table 4 to work out how much to pay.

    If you pay two instalments per year, use Table 5 to work out how much to pay.

    In most cases, you'll divide your yearly tax amount by four.
    Table 1: Four instalments – how much to pay each quarter

    Instalment quarter

    How much to pay for this quarter – your varied instalment amount

    First quarter in the income year that you are liable to pay an instalment

    • 25% of your estimated tax for the income year

    Second quarter for the income year

    • 50% of your estimated tax for the income year
    • Minus the amount of your 1st quarter instalment

    Third quarter for the income year

    • 75% of your estimated tax for the income year
    • Minus the amount of your 1st and 2nd quarter instalments
    • Plus any PAYG instalment credits you claimed for the 2nd quarter

    Fourth quarter for the income year

    • 100% of your estimated tax for the income year
    • Minus the amount of your 1st, 2nd and 3rd quarter instalments
    • Plus any PAYG instalment credits you claimed for the 2nd and 3rd quarters

     

    Example: How much to pay – quarterly payers

    Jane receives income from her investments. Her quarterly PAYG instalment amount is $1,000. Jane pays this amount in her first quarter (1 July to 30 September) and second quarter (1 October to 31 December).

    In January, Jane sells a portion of her investments and decides to vary her PAYG instalment amount on her March quarterly activity statement to take into account her new situation.

    Jane uses the PAYG instalment calculator and estimates the total tax payable on business and/or investment income for the year will be $3,100. Jane works out her varied PAYG instalment as follows: 

    Estimated tax

    $3,100

    Multiplied by 75% (how much to pay for the third quarter)

    $3,100 × 75% = $2,325

    Minus amounts paid for the first and second quarters

    $2,325 − $2,000 = $325

    Jane needs to pay $325 in the third quarter. This will be her varied amount.

    End of example
    Table 2: How much to pay if you’re given an instalment rate in the second quarter (October – December quarter)

    Instalment quarter

    How much to pay – your varied amount

    Second quarter for the income year

    • 25% of your estimated tax for the income year

    Third quarter for the income year

    • 50% of your estimated tax for the income year

    Fourth quarter for the income year

    • 75% of your estimated tax for the income year
    • Minus the amount of your April instalment (3rd quarter instalment)
    Table 3: How much to pay if you're given an instalment rate in the third quarter (January – March quarter)

    Instalment quarter

    How much to pay – your varied amount

    Third quarter for the income year

    • 25% of your estimated tax for the income year

    Fourth quarter for the income year

    • 50% of your estimated tax for the income year
    • Minus the amount of your April instalment (3rd quarter instalment)
    Table 4: How much to pay if you're given an instalment rate in the fourth quarter (April – June quarter)

    Instalment quarter

    How much to pay – your varied amount

    Fourth quarter for the income year

    • 25% of your estimated tax for the income year 
    Table 5: Two instalments – how much to pay

    Instalment period

    How much to pay – your varied instalment amount

    Instalment due in April (third quarter instalment)

    • 75% of your estimated tax for the income year

    Instalment due in July for the income year

    • 100% of your estimated tax for the income year
    • Minus the amount of your April instalment (3rd quarter instalment)

    Step 3: Complete your activity statement or instalment notice

    Enter the following on your activity statement, at:

    • T8 – the estimated tax for the year (from step 1), if this is nil enter 0
    • T9 the varied instalment amount for the quarter (from step 2), if this is nil enter 0
    • T4 – the variation reason code
    • 5A (if this label is on your form) – the T9 amount.

    If the varied instalment amount you worked out at Step 2 is negative, you can also claim a credit for PAYG instalments you paid earlier in the income year.

    On your activity statement at 5B, enter the varied instalment amount for the quarter (from Step 2) as a positive amount (do not show the minus sign).

    You do not have to claim your credit on your activity statement. If you overpay your PAYG instalments we will credit them to you after your annual tax return is processed.

    Complete any other labels on your activity statement as required.

    If you are satisfied that the information you have provided is not false or misleading, sign and date the form.

    Step 4: Lodge and pay

    Pay any amounts owing and lodge your activity statement by the due date.

    If you lodge online you will receive instant confirmation you have lodged. Online lodgment is fast, convenient and secure.

    If you're an individual (including sole traders) you can use your myGovExternal Link linked to the ATO to view, lodge, pay, vary and manage all your PAYG instalment obligations.

    You can also use the Business Portal to revise, print and list previous activity statements, check accounts, update business registration details and send secure messages.

    If you have nil amounts at all labels on your activity statement, you can lodge it easily and quickly over the phone on 13 72 26. You can't lodge over the phone for the quarter that you vary your instalments to nil but you can for later quarters where there are no other obligations to report.

    See also:

      Last modified: 14 Mar 2018QC 16159