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  • Choosing a payment option for your PAYG instalments

    This fact sheet explains the options that may be available to you for calculating your pay as you go (PAYG) instalment amount, and how to choose your payment option for this income year.

    If you are not eligible to pay instalments based on your gross domestic product (GDP) adjusted notional tax, then option 1 on your activity statement will be crossed out. Complete and return the activity statement by the due date on the form.

    Attention

    Changing your option on instalment notices (Form R or T) in Quarter 1

    If you have received a form R or T in quarter 1 and you would like to change to the instalment rate, contact us on 13 28 66.

    End of attention

    If you contact us to change your instalment rate, we will process the change of option and send a new instalment notice for you to lodge. You will need to notify us of your decision on or before 28 October if you want the change in reporting option to take effect for the current financial year.

    PAYG instalment payment options

    You can generally choose between two options for calculating and meeting your PAYG instalment obligation for this income year. If you have received a form R or T in Quarter 1, see the note above.

    Otherwise, generally you indicate your choice by placing 'X' in the appropriate box. If an option is not applicable to you, your activity statement will indicate this with the words 'do not complete this option' printed over it. In this case you must use the other option.

    Option 1 - instalment amount

    Under this option, you pay an amount calculated by us. We work out this amount using the business and investment income from your most recently assessed income tax return. The benefit of this method is that you will know the amount of your instalment each quarter, which may help you plan and budget for the payment.

    To ensure that we correctly record the option you choose, you need to lodge your activity statement and pay the amount shown by the due date.

    From the next quarter you will receive an instalment notice but you will not need to lodge the instalment notice unless you choose to vary your instalment amount (see Variations). However, you will still need to pay your instalment amount by the due date.

    This option is available to:

    • all individuals
    • companies and superannuation funds with business or investment income of $2 million or less in their most recently assessed income tax return
    • companies and superannuation funds that are eligible to pay quarterly PAYG instalments.

    Option 2 - instalment rate

    Under this option, your PAYG instalment is based on your actual income multiplied by a rate that we provide to you. The benefit of this method is that the amount you pay reflects your business and investment income for the quarter. So if you have fluctuations in your income, you may prefer this method.

    This option is available to all taxpayers.

    To make sure we correctly record the option you choose, you need to lodge your activity statement and pay your PAYG instalment by the due date.

    From the next quarter, you will continue to receive an activity statement. You will need to lodge your activity statement and pay the instalment amount by the due date each quarter.

    Attention

    Once you have chosen your option, you must continue to use that method for the remainder of the income year.

    End of attention

    If you wish to change your PAYG instalment option, you must wait until the first instalment quarter of the following income year.

    Variations

    If your income has changed since you lodged (or amended) your most recent income tax return, you may choose to vary the amount (at T7) or the rate (at T2) on your activity statement.

    Attention

    For more information on varying your PAYG instalment rate or amount, refer to How to vary pay as you go (PAYG) instalments (NAT 4159).

    End of attention

    If you choose to vary your PAYG instalment amount or rate, you must make sure that your activity statement is lodged and your instalment amount is paid by the due date printed on the front of the form, otherwise:

    • your variation may be rejected
    • you may incur the general interest charge on any amounts that remain unpaid.
    Attention

    You may be liable to pay the general interest charge if you vary your PAYG instalment amount down, and end up paying less than 85% of the actual tax that you should have paid on your business and investment income.

    End of attention

    Updating your address

    You can elect to have different postal addresses for some of your dealings with us, for example, your postal address for income tax purposes may be different to that for activity statement purposes.

    Lodging your income tax return will automatically keep your income tax address up to date but will not automatically update other addresses.

    To update your address for receiving activity statements, you can phone the business help line on 13 28 66.

    More information

    If you need more information about PAYG instalments, you can:

    Australian Taxation Office
    PO Box 1032
    ALBURY  NSW  2640

    • Last modified: 06 Sep 2012QC 18286