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Pay as you go (PAYG) instalments is a system for making regular payments towards your expected annual income tax liability. It only applies to you if you earn business and/or investment income over a certain amount.
We will notify you if you need to start paying by instalments under the PAYG instalment system.
As an individual or sole trader, from 1 July 2015 if you have a myGov account linked to the ATO, you will be able to view, lodge, pay, vary and manage all your PAYG instalment obligations online.
If you need to pay PAYG instalments, you still need to lodge an annual tax return. We'll take your PAYG instalments into account when calculating whether you owe more tax or are owed a refund.
Who needs to pay PAYG instalments
We work out whether you need to pay instalments based on information reported in your latest tax return. Generally, if your business and/or investment income is above a certain amount, you will need to pay instalments. There are some exceptions.
How to start paying instalments
There are two ways to start paying instalments. You will automatically enter the system once you lodge your first tax return that has business and/or investment income above the threshold. Alternatively, you can request to enter the system early and pay instalments voluntarily.
Your PAYG instalments correspondence
If we work out that you need to pay instalments, we will notify you. The letter will advise you of the options available for calculating your instalments and how often you need to pay.
Calculating the amount you pay
Most instalment payers can choose between two options to calculate how much to pay, instalment amount or instalment rate. If you're eligible to choose, this will be shown on your first activity statement or instalment notice.
How to vary the amount you pay
Whichever option you use for calculating your instalment, if your circumstances change, you can vary the amount you pay for the current income year.
How often you lodge and pay
PAYG instalments are generally paid quarterly. You may also have the option of paying two instalments a year or an annual instalment. Some businesses must pay monthly instalments.
Your activity statement or instalment notice
You report and pay your instalments using an activity statement or instalment notice, which we will send you.
Exiting PAYG instalments
If you no longer have to pay instalments, we will automatically remove you from the system. Alternatively, if your circumstances change, you can contact us to remove you from the system.
Update your address
If you wish, you can use a different postal address for activity statements / instalment notices to the one you use for income tax.
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