If you make a profit from renting your property, you will need to know about the PAYG instalments system.
The PAYG instalments system commenced on 1 July 2000 and replaced the former provisional tax system. This system requires you to pay instalments during each income year to meet your expected tax liability for that year. You will generally be required to pay PAYG instalments if you earn $2,000 or more of business or investment income-such as rental income-and the debt on your income tax assessment is more than $500.
If you are required to pay PAYG instalments the ATO notifies you. You will usually be required to pay the instalments at the end of each quarter. There are two options if you pay by quarterly instalments:
- pay the instalment amount calculated by the ATO (as shown on your activity statement), or
- pay the instalment amount you work out, based on your instalment rate multiplied by your investment and business income.
You may be able to pay an annual PAYG instalment if your notional tax is less than $8,000. Your notional tax is generally the equivalent of the tax you would have paid on your business and investment income, excluding any capital gain, based on your last income tax assessment.
For further information, see the publication PAYG instalments.