PAYG Instalment Variations – NEW ATO RULES

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Avoid incurring ATO interest charges and penalties as a result of varying your Instalment Payments by too much.
 
It is no longer acceptable to the ATO to vary your PAYG instalment payments to NIL, unless you are expecting not to have to pay any tax at the end of the financial year in question.
 
In order to avoid any interest charges and/or potential penalties, your PAYG instalment variation payments must add up to be at least 85% of your total tax payable for the end of the next financial year.
 
When you lodge your Tax Return the ATO assesses your situation and estimates what your tax payable might be for the next financial year and then require you to pre-pay this amount in 4 quarterly instalments.
 
Your options are as follows:
  • Either, accept the ATO’s estimated amount and pay the instalments they require, or
  • If you feel that the ATO has over-estimated what your tax payable might be for the next financial year, you can vary your quarterly instalment amounts based on your own genuine estimate of what you have calculated your tax payable might be for the next financial year.
 
It is very important, however, to understand that if you under-estimate your PAYG instalments and, if by the end of the financial year they don’t add up to at least 85% of your actual tax payable, you will be at risk of being charged both interest on the shortfall as well as possible penalty fees.
 
If you are uncertain, it is best not to vary your instalments. Any overpaid instalments will be refunded to you after you lodge your Tax Return.
 
 

Author

Lynne Linton