How much to pay
The PAYG instalment letter explains the head company's payment options. In most cases the head company pays consolidated group PAYG instalments that it calculates using the instalment rate x instalment income method. Some head companies have the option of paying instalment amounts we calculate.
If the head company's circumstances change, it can vary the instalment rate or amount.
When instalments are due, we send the head company a consolidated activity statement that it completes and returns with its payment. This is separate to the usual activity statement for other tax obligations, such as goods and services tax (GST), fringe benefits tax (FBT) instalments and PAYG withholding. All members of the group, including the head company, continue to receive their activity statements for these obligations and lodge according to their usual cycle.
The first consolidated activity statement shows the reporting options available to the head company. The head company can use only one option in an income year. Therefore, if the first consolidated activity statement is for a period other than the first instalment period of the head company's income year, only one option will be available. This will be the option used by the head company in the previous instalment period of that income year. In this event there will be a pre-printed X in the box next to that option.
Paying an amount worked out by head company
Instalment rate X instalment income method
In this option, the head company pays an amount worked out by multiplying its consolidated instalment rate by the consolidated group's instalment income for the instalment period.
The head company's consolidated instalment rate is shown on the letter from us and the consolidated activity statement. This rate can be varied if the group's circumstances change – see Changing the amount to pay below.
Working out the group's instalment income
A consolidated group's instalment income is the business and/or investment income of the group's members for the instalment period, excluding intra group transactions.
It includes only ordinary income that is assessable to the head company of the group, including the assessable income for all members.
Note: The exception is when the group has a member that is a life insurance company. When this occurs the group's instalment income also includes any statutory income included in any group members complying superannuation / First Home Saver Account (FHSA) taxable income.
Intra group transactions are ignored because they amount to accounting entries between parts of the same company for income tax purposes. As such, they are not income and not assessable to the head company.
For the head company to pay the group's monthly or quarterly PAYG instalments on time, it is important that subsidiary members of the group are prepared to report their contribution to the head company's instalment income shortly after the end of the head company's instalment period..
For quarterly-instalment taxpayers the payment cycle is based on the head company's balancing date. For example, if the head company balances on 30 June, the payments are due within 21 days of the end of the September, December, March and June quarters. If a subsidiary member has a different quarterly cycle to the head company, it may need to adjust its systems to be able to provide quarterly instalment income information according to the head company's quarterly cycle.
For entities required to pay monthly, the payment is due on the 21st after the end of each month.
How we calculate the consolidated instalment rate
We calculate the head company's consolidated instalment rate on the same basis as for an unconsolidated company.
However, if the head company has tax losses transferred to it from other group members, or former group members, the adjusted taxable income of the head company does not automatically take account of the amount of any carry-forward tax loss. Instead the lesser of the following amounts is taken into account:
- the amount of any carry-forward tax loss
- the amount of any tax loss deducted in the base year.
Taxation of financial arrangements – monthly payer
Consolidated entities that apply the rules for taxation of financial arrangements (TOFA) are required to use an adjusted base assessment instalment income to determine if they are required to pay monthly instalments. This figure is calculated using the gross amount of ordinary income from TOFA transactions, not the net gain or loss amount calculated under the rules.
If the adjusted base assessment instalment income exceeds the threshold, the entity will need to pay its PAYG instalments monthly. Where we can calculate this amount we will advise entities in October. However, most TOFA entities will need to calculate their adjusted base assessment instalment income in order to determine if they are required to make monthly instalments. Those entities will need to notify us for their inclusion by 30 November each year.
Monthly payer requirement test
In addition to the October test date, entities who exceed the relevant threshold on the first day of the 10th month of their income year will be required to pay monthly instalments from the first instalment period of their next financial year. On the first day of each month, a monthly payer requirement test is conducted to determine those entities entering monthly instalments. These entities will receive a letter from us confirming their entry.
If an entity enters instalments for the first time, and exceeds the relevant threshold, they will be required to pay monthly instalments from the beginning of the following month.
Paying an amount we calculate- quarterly payers only
This option is available to the head company if the group's gross business and/or investment income is $2 million or less. Monthly payers are not eligible to pay by amount.
The main advantages of this option are that the subsidiary members don't need to provide quarterly income information to the head company and the head company doesn't need to work out how much to pay. We have already worked out an amount to pay, based on the group's previous tax situation. If the amount provided is not appropriate, you can vary the instalment amount.
Find out about:
The amount is shown on the consolidated activity statement. If the group's circumstances change, it can vary the amount – see Changing the amount to pay below.
Changing the amount to pay
A head company can vary its consolidated instalment based on its estimate of the expected consolidation outcomes for the year. When varying as a result of consolidation, they use the special variation code 33 at item T4 of the consolidated activity statement.
The head company may be liable for the general interest charge (GIC) if it uses either the:
instalment rate x instalment income method and the varied instalment rate is less than 85% of the head company's benchmark instalment rate for that income year
GDP adjusted instalment amount method and the varied amount is based on an estimate that is less than 85% of the head company's benchmark tax for that income year.