• PAYG instalment option 2 labels

    Instalment options - T1 and T2

    T1
    PAYG instalment income

    Work out your instalment income for the quarter and write this at T1. If you don't have any instalment income for the period, write '0'.

    Include at T1 all ordinary income you earned from your business or investment activities for the quarter (excluding GST) such as:

    • goods or services that you sell or supply
    • interest received or credited to your bank account
    • gross rent
    • dividends paid or reinvested on your behalf (do not include imputation credits)
    • royalties
    • gross amount of income where tax has been withheld because you did not provide your tax file number or Australian business number
    • foreign pensions that are assessable in Australia
    • your proportion of any partnership or trust income,
    • withdrawals from farm management deposits (if you make a farm management deposit, your instalment income for that period is reduced)
    • fuel tax credits and
    • Taxation of financial arrangements (TOFA) made up of total TOFA gains less TOFA losses but only include if this is a positive amount

    For more information, refer to:

    Don't include at T1:

    • Capital gains
    • GST, wine equalisation tax or luxury car tax you collected
    • input tax credits
    • any income (such as salary, wages or income subject to a PAYG voluntary agreement) where amounts have been withheld or should have been withheld (other than income that an amount has been withheld from because you did not provide your tax file number or Australian business number)
    • loans received
    • owner's capital
    • grants under the product stewardship (oil) benefit and the cleaner fuels grant scheme
    • amounts transferred between accounts
    • imputation (franking) credits
    • interest or other earnings credited to a first home saver account that you hold or a payment to you from such an account, or
    • government contributions paid under the First Home Saver Account Act 2008.

    Don't reduce your instalment income by any allowable deductions that you incur in deriving the income. The allowable deductions that you claimed in your most recently assessed income tax return will be reflected in your instalment rate calculated by us. You can vary your instalment rate if you think that using the rate provided will result in you paying more (or less) than your expected tax for the income year.

    T2
    Instalment rate

    The rate pre-printed at T2 will be either:

    • the instalment rate worked out by us, or
    • your most recent varied rate if you have varied the instalment rate in a previous quarter in the same income year.

    If you want to use the rate pre-printed at T2, multiply the amount shown at T1 by this rate. Write the result at T11.

    To vary the instalment rate, you must fill in T3 and T4.

    Section T3 and T4

    T3
    New varied rate

    If you want to vary your instalment rate, write your new rate at T3.

    For more information, refer to How to vary pay as you go (PAYG) instalments (NAT 4159).

    T4
    Reason code for variation

    If you vary your instalment rate, choose a reason from the list below that best describes why and write the appropriate code at T4.

    Reason

    Code

    Change in investments

    21

    Current business structure not continuing

    22

    Significant change in trading conditions

    23

    Internal business restructure

    24

    Change in legislation or product mix

    25

    Financial market changes

    26

    Use of income tax losses

    27

    Consolidations

    33

    There is no need to vary just because your income has gone up or down since your last quarter. The instalment rate is a percentage, so the amount you pay will go up or down in keeping with your income. For example, if your investment and business income for the quarter is zero, the amount you pay will also be zero, regardless of your instalment rate.

    T11
    T1 x T2 (or T1 x T3)

    Multiply the amount at T1 by either:

    • the instalment rate pre-printed at T2, or
    • if you vary the rate, your new varied rate that you wrote at T3.

    Write the result at T11.

    Section 5A

    5A
    PAYG income tax instalment

    Copy the amount at T11 to 5A on your activity statement. This is the amount of your PAYG instalment for the quarter.

    You can write '0' at 5A instead of your instalment amount if:

    • your instalment amount for the period covered by the activity statement is $50 or less
    • you are not claiming a credit at 5B, and
    • PAYG instalments is your only obligation.

    Example
    In the first quarter of the income year, you are offered a choice of options. You decide to use option 2 and you place an X in the option 2 box.

    Your income for the quarter is:

    • total sales of $22,000 (including $2,000 GST), and
    • interest and dividends received of $100.

    Your instalment income is $20,100 (that is $22,000 less $2,000 GST plus $100 other income). Write the figure 20,100 at T1.

    Our calculated instalment rate pre-printed on your activity statement at T2 is 1.7%.

    You calculate the instalment amount to pay as follows:

    T1 x T2 = $20,100 x 1.7% = $341.70

    Write the figure 341 at T11. Copy the figure 341 to 5A.

    Option 2

    Section 5B

    5B
    Credit from PAYG income tax instalment variation

    If you have decided to use a varied instalment rate and your varied instalment rate at T3 is less than the instalment rate pre-printed at T2, you may be entitled to a credit from earlier instalments for the same income year.

    A credit will only be available if the earlier instalments were worked out using a higher instalment rate.

    We offset this credit against any other tax liabilities on your activity statement. This is included in your net tax payment or refund amount at 9 in the 'Payment or refund?' section of your activity statement.

    If the instalment you are varying is your first for the income year, you can't claim a credit.

    Even if you are entitled to a credit, you don't have to claim it in your activity statement. If your total instalments for the year are more than the tax on your business and investment income, we will credit you with the overpayment when we assess your annual income tax return.

    If you are entitled to a credit for a previous instalment and wish to claim it on your activity statement, write the credit amount at 5B.

    Example
    We notify you that your instalment rate will be 10% for the first quarter. You multiply this rate by your instalment income of $1,000, resulting in an instalment payment of $100.

    For the second quarter you choose to vary the instalment rate to 5%. You multiply your current instalment income of $1,000 by the varied rate, resulting in an instalment payment of $50.

    You then decide to claim a credit to put you in the position that you would have been in if your instalment rate had always been 5%.

    Use the following table to calculate the amount of credit you can claim at 5B.

    1

    Add up your earlier instalments (the amounts reported at 5A) even if you haven't paid all of them

    $100

    2

    Add up any credits claimed in previous quarters (amounts reported at 5B on a previous activity statement)

    $0

    3

    Subtract the amount at step 2 from step 1

    $100

    4

    Add up instalment income for all earlier quarters of the income year

    $1,000

    5

    Multiply the amount at step 4 by the varied instalment rate

    $1,000 x 5%
    =$50

    6

    Subtract the amount at step 5 from the amount at step 3

    $100 - $50
    =$50

    7

    If the result is a positive amount, this is the amount of credit that may be claimed at 5B

    $50

    If you think you may be entitled to a credit and wish to claim it on your activity statement, refer to How to vary pay as you go (PAYG) instalments (NAT 4159).

      Last modified: 06 Jul 2016QC 27149