Completing the PAYG instalment labels for Option 2

To calculate and report your instalment amount, use the following labels:

If you want to vary your instalment rate, you may also use:

T1 - PAYG instalment income

Calculate your instalment income for the quarter and enter this at T1. If you don't have any instalment income for the period, enter '0'.

Do include

Don't include

  • goods or services that you sell or supply
  • interest received or credited to your bank account
  • gross rent
  • dividends paid or reinvested on your behalf - don't include imputation credits royalties
  • gross amount of income where tax has been withheld because you did not provide your tax file number (TFN) or Australian business number (ABN)
  • foreign pensions that are assessable in Australia
  • your proportion of any partnership or trust income
  • withdrawals from farm management deposits
  • fuel tax credits.
  • GST, WET or LCT you collected
  • GST credits
  • any income - such as salary, wages or income subject to a PAYG voluntary agreement - where amounts have been withheld or should have been withheld (other than income that an amount has been withheld from because you did not provide your TFN or ABN)
  • loans received
  • owner's capital
  • grants under the energy grants credits scheme, including the fuel sales grant, the product stewardship (oil) benefit and the cleaner fuels grant scheme
  • capital gains
  • amounts transferred between accounts
  • imputation (franking) credits.

Don't reduce your instalment income by any allowable deductions you incur in deriving the income. The allowable deductions you claimed in your most recently assessed income tax return will be reflected in your instalment rate calculated by us.

You can vary your instalment rate if you think that using the rate provided will result in you paying more (or less) than your expected tax for the income year.

Note for super funds

Super funds need to include any amounts of statutory income at T1. This includes:

  • net capital gains
  • gross interest
  • gross dividends
  • gross taxable employer contributions
  • gross taxable employee or depositor contributions
  • gross distributions from trusts
  • gross distributions from partnerships
  • gross foreign income.

See also:

T2 - Instalment rate

The rate displayed at T2 will be either:

  • The instalment rate worked out by us
  • Your most recent varied rate, if you have varied the instalment rate in a previous quarter in the same income year.

If you want to use the rate displayed at T2, multiply the amount shown at T1 by this rate. Enter the result at T11.

To vary the instalment rate, fill in T3 and T4.

T3 and T4 - varying your instalment rate

If you think that using the displayed rate will result in you paying more (or less) tax than your expected tax for the year, you can vary it. To vary your instalment rate, fill in T3 and T4.

There is no need to vary just because your income has gone up or down since your last quarter. The instalment rate is a percentage, so the amount you pay will go up or down in keeping with your income. For example, if your investment and business income for the quarter is zero, the amount you pay will also be zero, regardless of your instalment rate.

If you vary your instalment amount and, as a result, pay less than 85% of your actual tax liability on your business and investment income, you may incur general interest charge (GIC). If you use the instalment amount the ATO calculated there is no risk that you will incur the GIC.

Whether or not you vary your PAYG instalment, when your income tax return is processed your PAYG instalments will be credited against your assessment to work out if you owe more tax or are owed a refund.

T3 - New varied rate

If you want to vary your instalment rate, enter your new rate at T3.

Your varied rate should be:

estimated income tax on your instalment income for the year


estimated instalment income for the year

T4 - Reason code for variation

If you vary your instalment rate, choose a reason from the list below that best describes why and enter the appropriate code at T4.



Change in investments


Current business structure not continuing


Significant change in trading conditions


Internal business restructure


Change in legislation or product mix


Financial market changes


Use of income tax losses




T11 = T1 x T2 (orT1 x T3)

To complete T11, multiply the amount at T1 by either:

  • The instalment rate displayed at T2; or
  • If you vary the rate, your new varied rate that you entered at T3.

Enter the result at T11.

5A - PAYG income tax instalment

Copy the amount at T11 to 5A on your BAS. This is the amount of your PAYG instalment for the quarter.

Enter '0' at 5A instead of your instalment amount if all the following apply:

  • your instalment amount for the period covered by the business activity statement is $50 or less; and
  • you're not claiming a credit at 5B,
  • PAYG instalments is your only obligation.

5B - Credit from PAYG instalment variation (optional)

If you have decided to use a varied instalment rate and your varied instalment rate at T3 is less than the instalment rate displayed at T2, you may be entitled to a credit from earlier instalments for the same income year.

A credit will only be available if the earlier instalments were calculated using a higher instalment rate.

We offset this credit against any other tax liabilities on your business activity statement. This is included in your net tax payment or refund amount at 9 in the Payment or refund? section of your BAS.

If the instalment you're varying is your first for the income year, you can't claim a credit.

If you are entitled to a credit for a previous instalment and want to claim it on your BAS, enter the credit amount at 5B.

Even if you're entitled to a credit, you do not have to claim it in your BAS. If your total instalments for the year are more than the tax on your business and investment income, we will credit you with the overpayment when we assess your annual income tax return.


We notify you that your instalment rate will be 10% for the first quarter. You multiply this rate by your instalment income of $1,000, resulting in an instalment payment of $100.

For the second quarter, you choose to vary the instalment rate to 5%. You multiply your current instalment income of $1,000 by the varied rate, resulting in an instalment payment of $50.

You then decide to claim a credit to put you in the position that you would have been in if your instalment rate had always been 5%.

Use the following table to calculate the amount of credit you can claim at 5B.


Add up your earlier instalments (the amounts reported at 5A) even if you haven't paid all of them



Add up any credits claimed in previous quarters (amounts reported at 5B on a previous BAS)



Subtract the amount at step 2 from step 1



Add up instalment income for all earlier quarters of the income year



Multiply the amount at step 4 by the varied instalment rate

$1,000 x 5%


Subtract the amount at step 5 from the amount at step 3

$100 - $50


If the result is a positive amount, this is the amount of credit that may be claimed at 5B



End of example

Next steps:

See also:

Lodge your BAS

Last modified: 10 Dec 2014QC 33673