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  • Estimating the tax on your instalment income

    You can use the PAYG instalments calculator or the information below to estimate the tax on your instalment income (business and/or investment income).

    If your instalment income for the year will be zero, you can vary your instalment amount or instalment rate to zero. You do not need to estimate your tax or income to do this.

    Find out about:

    Calculate estimated taxable income

    Your estimated taxable income is your estimated income minus estimated allowable deductions.

    Calculate estimated tax on instalment income

    Use this method to calculate estimated tax on instalment income:

    1. Tax on estimated taxable income
    2. minus estimated tax offsets (other than refundable tax offsets and foreign income tax offset), for example Zone Tax Offset, super contributions 
    3. equals estimated net tax payable before applying foreign income tax offset and Medicare levy (if negative use zero)
    4. plus estimated Medicare levy
    5. plus estimated Higher Education Loan Program (HELP) repayment
    6. plus estimated Compulsory Financial Supplement repayment
    7. plus estimated Trade Support Loan (TSL) repayment 
    8. minus estimated refundable tax offsets
    9. minus estimated foreign income tax offset
    10. minus estimated tax credits
    11. equals Estimated tax on instalment income.

    Income

    When you are estimating your income, include all your estimated gross income, such as:

    • salary, wages or allowances
    • payments made under a labour hire arrangement
    • payments subject to voluntary withholding agreements
    • personal services income attributed to you
    • income from a business (not subject to voluntary agreements)
    • Australian government allowances
    • Australian government pensions
    • assessable foreign income including pensions and annuities
    • interest
    • dividends
    • franking credits
    • partnership distributions
    • trust distributions
    • other assessable income.

    Do not include:

    • net capital gains (these are not included as they are generally one-off payments that you will not receive in the next income year. If you are a super fund or self-managed super fund, these do need to be included)
    • exempt income such as the family tax benefit or child care benefit payments.

    Allowable deductions

    When you are estimating your allowable deductions, include your estimate of your allowable deductions, such as:

    • work-related expenses
    • business expenses
    • interest and dividend deductions
    • gifts or donations
    • the deductible amount of an un-deducted purchase price of an Australian pension or annuity
    • the cost of managing tax affairs
    • tax losses of earlier income years
    • other allowable deductions.

    Tax on estimated taxable income

    Apply the current tax rate to your estimated taxable income.

    If you are a resident of Australia, these tax rates apply for the current income year.

    See also:

    Tax offsets (other than refundable tax offsets)

    When you are estimating your tax offsets, do not include refundable tax offsets. Tax offsets may include:

    • super contributions, annuity and pension (except contributions made on behalf of your spouse)
    • zone or overseas forces
    • seniors and pensioners tax offset
    • invalid and invalid carer tax offset
    • beneficiary tax offset
    • net medical expenses tax offset
    • eligible termination payment tax offset
    • life assurance bonus tax offset
    • other tax offsets.

    Tax offsets are not deductions. You take deductions from your income to work out your taxable income. The tax on your taxable income is then reduced by your tax offsets.

    Some tax offsets are refundable. Do not include refundable tax offsets here as there is a section for them later in the worksheet.

    If your tax offsets are greater than the tax on your assessed taxable income, you can generally only use them to reduce the amount of tax on your taxable income to zero.

    Tax offsets generally (with the exception of the foreign income tax offset) do not reduce your liability to pay the Medicare levy. We work out the Medicare levy on your estimated taxable income.

    Do not include foreign income tax offset here as there is a section for it later in the worksheet.

    Do not include the following in the tax estimate worksheet:

    • franking deficit tax offset
    • private health insurance tax offset
    • child care tax offset
    • low income earners tax offset
    • early stage investors tax offset
    • exploration development incentive tax offset
    • offset for Medicare levy surcharge (lump sum payment in arrears)
    • the super tax offset for contributions made on behalf of your spouse.

    These tax offsets will not reduce your estimated tax on instalment income. They are only taken into account when we assess your tax return. You should not vary the amount of your PAYG instalment for these tax offsets.

    You will not be able to work out your foreign income tax offset if you estimate either a capital gain or exempt foreign employment income. If you expect to receive any of these, contact us for more information.

    See also:

    Find out about:

    Net tax payable before applying foreign income tax offset and Medicare levy

    Your estimated net tax payable will be your tax on estimated taxable income minus your estimated tax offsets.

    If this is a negative amount, your estimated net tax payable will be nil. Enter 0 in this box. This is because your tax offsets (other than foreign income tax offset and refundable tax offsets) cannot reduce your Medicare levy or compulsory HELP or Financial Supplement repayments.

    If you are entitled to claim an amount of foreign income tax offset, you can use that offset to reduce any net tax payable remaining after applying all your other non-refundable tax offsets, and also reduce your liability to pay the Medicare levy.

    Medicare levy

    Your estimated Medicare levy can be worked out by multiplying your estimated taxable income by 2%.

    Do not include extra amounts payable under the Medicare levy surcharge.

    You may be exempt from paying the Medicare levy or be eligible to pay a reduced amount of Medicare levy. Phone us if you think you may be exempt or eligible to pay a reduced amount.

    Net tax payable after applying Medicare levy and foreign income tax offset

    This is your estimated net tax payable after applying all your non-refundable tax offsets and the Medicare levy.

    If this is a negative amount, your estimated net tax payable will be nil. Enter 0 in this box.

    Compulsory HELP, Financial Supplement and Trade Support Loan repayment

    This item applies to you if you have to repay amounts under the Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS) or Trade Support Loan (TSL).

    Your estimated tax may include an amount for you to pay toward your HELP, SFSS and TSL liability if your estimated repayment income is above the minimum repayment threshold.

    Repayment income is calculated using the following amounts from your tax return:

    • taxable income
    • reportable fringe benefits amounts (as reported on the payment summary)
    • total net investment loss (which includes net rental losses)
    • reportable super contributions
    • any exempt foreign employment income amounts.

    We will only calculate one compulsory repayment for HELP, SFSS and TSL (if applicable) in this assessment based on your accumulated debt at the time we make the assessment.

    You will not have to make a compulsory repayment for HELP, SFSS or TSL if you have a spouse or dependants and if, due to low family income, you either:

    • are entitled to a reduction of your Medicare levy
    • do not have to pay the Medicare levy.

    To calculate your estimated compulsory repayment, refer to HELP repayment thresholds and rates, Financial Supplement repayment thresholds and rates or Trade Support Loan thresholds and rates.

    Refundable tax offset

    Where you have refundable tax offsets available, you can apply these to reduce your tax, including your Medicare levy.

    Refundable tax offsets include the franking credit tax offset (the equivalent of the franking credits that you estimate you will receive for the financial year).

    These tax offsets can be applied against your Medicare levy, HELP or Financial Supplement debt liabilities and any excess will be refunded to you after we have assessed your return.

    Do not include the private health insurance rebate tax offset. You cannot reduce your estimated tax on instalment income with this tax offset. We only take it into account when we assess your tax return. You should not vary the amount of your PAYG instalment for this offset.

    Estimated tax credits

    These items include amounts that you estimate will be withheld from payments made to you such as:

    • salary or wages
    • payments subject to voluntary agreements
    • payments made under a labour hire arrangement
    • personal services income attributed to you
    • investments where you have not supplied a TFN
    • sales or services you have provided where you have not quoted an ABN.

    Tax on instalment income

    If this amount is a negative figure, your estimated tax is nil.

      Last modified: 14 Mar 2018QC 16159