PAYG reporting – common errors for rate payers
We have identified some common errors when reporting quarterly pay as you go (PAYG) instalment income in activity statements and are contacting you or your clients to discuss these. The following tips will help to avoid those errors.
Report gross income
Your client must report their gross instalment income (not their net or taxable income). The income they report should not be reduced by any allowable deductions they incurred in deriving that income.
Monthly GST payers must report quarterly income
Quarterly instalment payers who pay GST monthly are required to work out their gross instalment income for the full quarter and report this at label T1 on their activity statement.
Include all instalment income for the quarter
Your client must include all relevant income when calculating their gross instalment income. This includes:
- goods or services they sell or supply
- interest received or credited to their bank account
- gross rent
- dividends paid or reinvested on their behalf (do not include imputation credits)
- gross amount of income where tax has been withheld because they did not provide their tax file number or Australian business number
- foreign pensions that are assessable in Australia
- their proportion of any partnership or trust income
- withdrawals from farm management deposits (if they make a farm management deposit, their instalment income for that period is reduced)
- fuel tax credits
- Taxation of financial arrangements (TOFA) made up of total TOFA gains less TOFA losses (but only include if this is a positive amount).
We recommend you double check to ensure your client hasn't excluded relevant income.
If the T2 rate is nil, report an income amount
If your client’s instalment rate at label T2 is nil, they must still include the amount of their gross instalment income at label T1 on their activity statement.
Vary the instalment rate, not T1 amounts
If your client's financial circumstances have changed, they may need to vary their instalment to accurately reflect their current circumstances. In this situation, they must only vary the instalment rate. The full amount of their gross instalment income should still be included at label T1 on their activity statement.
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We have identified some common errors when reporting quarterly pay as you go (PAYG) instalment income in activity statements. Find out how you can avoid these errors and report PAYG instalments correctly.