• How to start paying instalments

    There are two ways to start paying instalments. You will automatically enter the PAYG instalments system once you lodge your first tax return that has business and/or investment income above the threshold.

    Automatic entry

    If you lodge a return with business and/or investment income above the threshold and you need to start paying PAYG instalments, we will write to you. We will notify you about the options available for calculating your instalments and how often you need to pay (see Your PAYG instalments correspondence).

    Voluntary entry

    If you think you're going to make a profit on your business or investment income, you can choose voluntary entry into PAYG instalments. This reduces the chances of having to pay a large amount at the end of the year. If you're new to business, we recommend this option.

    To enter the PAYG instalments system voluntarily, you will need to:

    If your circumstances change, you can vary (increase or decrease) your instalments for a later quarter, so that any amount paid correctly reflects your circumstances.

    This video is a guide on how you can enter the PAYG instalments system by phone

     

    Duration 5:56. A transcript of Voluntary registration for PAYG instalments is also available.

    Estimating the amount of tax to pay

    You can work out the amount of tax you need to pay and your PAYG instalment amounts, based on your estimated income. Use our online tools and calculators to estimate:

    • how much to put aside each week, or
    • your projected annual tax liability.

    How much to put aside each week

    Soon after starting a business, you should be able to work out your net weekly earnings, using the following formula:

    Taxable weekly earnings minus calculated tax = net weekly earnings

    You can use our Tax withheld calculator (or tax tables) to estimate the tax payable each week. For example, if you are turning over $1,442 per week (after running costs) and you anticipate that you'll continue to earn similar amounts each week, the tax payable each week is worked out as follows:

    $1,442 (weekly earnings) minus $336 (tax) = $1,106 (net weekly earnings).

    Based on this calculation, you'll need to put aside $336 each week to cover your estimated tax liability for the year ($336 x 52 = $17,472).

    To calculate the amount to pay per instalment quarter, divide the annual amount by four ($17,472 divided by 4 = $4,368).

    See also:

    Your projected annual tax liability – individuals

    As an alternative, you can work out the tax liability on your projected annual income using the following formula:

    Assessable income minus allowable deductions = taxable income

    For example, you operate your business as a sole trader and you estimate for the 2015–16 financial year that your turnover will be $80,000 and your allowable deductions will total $5,000. Your taxable income is $75,000, which is calculated as follows:

    $80,000 (assessable income) minus $5,000 (allowable deductions) = $75,000 (taxable income).

    You can use our PAYG instalments individuals calculator to work out the tax payable on $75,000, per annum or per quarter. Based on 2015–16 tax rates, the annual tax payable (including the Medicare levy) is $17,422 and the quarterly amount is $4,355.

    Many taxpayers like to save regularly towards their tax obligation. To determine a weekly amount, divide the estimated annual tax payable by 52 (that is, $17,422 divided by 52 = $335).

    Your projected annual tax liability – companies

    If you operate your business as a company, you can work out the tax liability on your projected annual income using the same formula.

    Assessable income minus allowable deductions = taxable income

    For example, you estimate for the 2015–16 financial year the company's total income will be $150,000. This may include income from sales, dividends and interest. You also estimate the running costs and expenses to be $45,000 and this includes the cost of sales, motor vehicles expenses and rent.

    $150,000 (assessable income) minus $45,000 (allowable deductions) = $105,000 (taxable income).

    You can use our PAYG instalments calculator for companies to estimate the tax payable on $105,000 per annum or per quarter. Based on the 2015–16 company tax rate, the annual tax payable is $29,925 and the quarterly amount is $7,481.

    The tax rate for companies that qualify as a small business entity is 28.5%. The tax rate that applies for all other corporate entities is 30%.

    This liability will need to be considered when managing your company's cash flow.

    See also:

    Requesting voluntary entry

    If you've decided voluntary entry into PAYG instalments is best for you, you can arrange this:

    • online (via myGov) if you’re an individual taxpayer or sole trader, or
    • by phone.
    Enter PAYG instalments

    Forgotten your myGov username and/or password?External Link

    Phone us:

    • 13 28 61 for individuals not in business
    • 13 28 66 for businesses.

    We will just ask you a few questions about your circumstances.

    Once you've entered the system, you will receive activity statements or instalment notices showing your estimated instalment amount which can be zero. You can vary the amount to suit your circumstances.

    Last modified: 11 Jul 2016QC 45456