• Partnerships and PAYG instalments

    If your business is a partnership, you can work out instalment income where a partner pays instalments each period by using the 'instalment income x instalment rate' option.

    • The partner's share of the instalment income is based on the partnership's instalment income for the period.
    • The partnership's instalment income excludes amounts attributed to the individual under the PSI rules.

    The amount of PSI attributed is reduced (but not below nil) by the amount of certain deductions the partnership is entitled to. Therefore, some amounts of PSI will be included in the partnership's instalment income, even in those cases where the partnership net income is reduced to nil because of the attribution process. In such cases the partners should consider varying their instalment rate.

    This year some of my partnership income will be subject to the additional PAYG withholding obligations. Last year I split this income with my partner. Should I vary my instalment rate or instalment amount?

    If your partnership is a personal services entity, any attributed income that is subject to additional PAYG withholding is not instalment income of either the partnership or the partners to whom the income is attributed.

    As this income was distributed between the partners last year you may want to vary your instalment rate or amount down.

    Find out more

    How to vary pay as you go (PAYG) instalments

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    The partnership I'm in is a personal services entity. I pay instalments each period using the instalment income x instalment rate option. How do I work out my instalment income?

    Your share of the instalment income is based on the partnership's instalment income for the period.

    The partnership's instalment income excludes amounts attributed to the individual under the alienation measure.

    The amount of PSI attributed is reduced (but not below nil) by the amount of certain deductions to which the partnership is entitled. Therefore, some amounts of PSI will be included in the partnership's instalment income, even in those cases where the partnership net income is reduced to nil because of the attribution process. Therefore, you should consider varying your instalment rate.

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    PAYG instalments income - partnerships

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    Previously, one of our partners paid PAYG instalments, because our partnership was not aware of its obligation to pay additional PAYG withholding. Will the ATO take these payments into consideration when determining interest or penalties?

    The partnership is liable to a penalty because it has failed to pay additional PAYG withholding amount as required. The penalty is equal to the additional PAYG withholding amounts that the partnership should have paid to us.

    However, we have the discretion to remit the penalty amount. When deciding on remission of penalty, we will consider the entity's conduct both at and leading up to the time that the failure to pay the additional PAYG withholding amounts occurred. Any PAYG instalments paid by the partners may also be considered.

    The extent of penalty remission would be considered on a case-by-case basis in line with the principles of our compliance model.

    Find out more

    For information about remission of the GIC, see ATO Practice Statement Law Administration PS LA 2011/12External Link

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      Last modified: 14 Sep 2016QC 17515