Why do I have to pay quarterly tax instalments?
As a business owner or investor you may think that taxes are always paid annually. However, there are two ways to pay tax: in one lump sum at the end of the financial year when you lodge your tax return, or in pay as you go instalments across the year so you don’t end up with a huge tax bill in one go.
Here’s what you need to know.
What Are Pay As You Go Instalments (PAYGI)
- PAYG Instalments are regular payments of tax on your business and investment income
- The instalments are paid every 3 months and essentially mean you are prepaying tax that will come off your end of year tax bill – helping avoid a nasty lump sum payment
- At the end of the financial year, if you did end up overpaying tax via instalments, you will receive a refund for the excess. And if your instalments didn’t quite cover the total tax, you will be required to pay the difference upon lodgement.
When do I have to pay them?
If you’re an individual (including a sole trader) or trust, you will automatically enter the PAYG instalments system if you have the following:
- Instalment income from your latest tax return of $4,000 or more
- Tax payable on your latest notice of assessment of $1,000 or more
- Estimated (notional) tax of $500 or more
Can the instalments be varied?
As PAYG instalments are prepayments of your expected income tax for the year, you have the ability to vary the instalments (to be less or more). This is generally the case when your business or financial situation has changed and thus, your expected tax may also change.
Have any questions? Contact us
Versa Advisory – Accountants in Melbourne
Website: https://versaadvisory.com.au
Google Map: https://www.google.com/maps?cid=15543288339898893134
Phone: (03) 9088 2433
Email: hello@versaadvisory.com.au
