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  • How to start paying instalments

    There are two ways to start paying instalments:

    • you will automatically enter the PAYG instalments system once you lodge a tax return that has business and/or investment income above the threshold
    • you can voluntarily enter into PAYG instalments if you think you're going to make a profit from your anticipated business and/or investment income, after allowable tax deductions are taken into account.

    Automatic entry

    If you lodge a tax return with business and/or investment income above the threshold, you‘ll need to start paying PAYG instalments. We will let you know when you need to start paying, how often and the options available for calculating your instalments.

    See also:

    Voluntary entry

    If you think you're going to make a profit from your anticipated business and/or investment income, after allowable tax deductions are taken into account, you can voluntarily enter into PAYG instalments. This reduces the chances of having to pay a large tax 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 so that any amount you pay will correctly reflect your circumstances.

    The video – Voluntary registration for PAYG instalments – is a guide on how you can enter the PAYG instalments system.

    Media: [Voluntary registration for PAYG instalments]
    http://tv.ato.gov.au/ato-tv/media?v=bd1bdiubtf8ncqExternal Link (Duration: 06:23)

    Estimating the amount of tax to pay

    You need to estimate your annual business and/or investment income along with your allowable tax deductions. This will help you work out the amount of your PAYG instalments.

    You can use our PAYG instalment calculator to do this. There's a different calculator for individuals (including sole traders), companies and superfunds. Our calculators include all the up-to-date tax rates.

    Once you have worked out your PAYG instalment amount, you can then work out how much tax to put aside to cover your instalments.

    Example

    Danielle is running a business as a sole trader and estimates she will be earning business income of $100,000 for the financial year with allowable business tax deductions of $10,000.

    PAYG instalment amount

    Danielle inputs her business income of $100,000 and taxable income of $90,000 (business income less business tax deductions) into the PAYG instalments individuals' calculator.

    The calculator then estimates her PAYG instalment amount to be $22,732 per year.

    How much to put aside each week

    Danielle uses the estimated instalment amount to work out how much to put aside each week for PAYG instalments: $22,732 ÷ 52 weeks = $437.15

    When she receives her quarterly business activity statement (BAS), Danielle has enough money put aside to pay her PAYG instalment for the quarter.

    When she lodges her tax return, the PAYG instalments she has paid throughout the year will be offset against her tax liability, reducing (or even eliminating) it.

    End of example

    Requesting voluntary entry

    If you’re an individual taxpayer or sole trader, you can voluntarily enter into PAYG instalments online through myGov.

    Log in to myGov

    You can also request voluntary entry through your registered tax agent or by phone:

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

    If you or your agent phones us, we will ask a few questions about your circumstances.

    Paying your instalments

    • Once you've entered the PAYG instalments system, you will receive activity statements or instalment notices showing your instalment rate or amount (which can be zero).
    • You can vary the amount on your current activity statement if you believe you might end up paying too much (or too little) tax for the year.
    • Make sure you pay your instalments by the due date.
    Last modified: 05 Jul 2018QC 45456