Pay as You Go
Pay as You Go (PAYG) instalments allow you and your business to meet your income tax obligations.
PAYG instalments explained
PAYG instalments is a system for making payments each quarter towards your expected income tax obligation on your business and investment income for the current financial year.
PAYG instalments are generally paid by business owners, investors and sub-contractors who earn a certain amount of income.
The Australian Taxation Office (ATO) will write to tell you if you must pay PAYG instalments.
PAYG changes explained
Changes to Pay As You Go (PAYG) instalment thresholds have been introduced to help save you and your business, time and money.
Changes to PAYG instalments from 1 July 2014 include:
- an increase to PAYG instalment thresholds, which may mean you no longer need to pay an instalment. Threshold changes include:
- business or investment income increases from $2 000 to $4 000
- adjusted balance of assessment increases from $500 to $1 000
- notional tax increases from $250 to $500.
- no longer being required to remain in the PAYG system if you have a zero instalment rate, even if you're registered for Goods and Services Tax (GST)
- automatic removal from the PAYG instalments system if you no longer meet the PAYG instalment thresholds - the ATO will let you know if this happens.
PAYG instalments VS PAYG withholding explained
It's important to note that PAYG instalments are different to PAYG withholding.
If you're an employer, PAYG withholding is your legal requirement to keep a portion of payments made to your employees and other businesses, which you then pay to the ATO.
You complete this on your employee's behalf by withholding some of their pay as tax. Your employees can make a claim against the amount withheld at the end of the financial year.
You may also have to withhold tax from payments you make to other workers, such as contractors. For more information on meeting your requirements as an employer, visit our page on Register for PAYG withholding.
What to do…
- For more information on the PAYG instalment changes check out the ATO Do you have to pay PAYG instalments? article.
- If you still wish to pay instalments towards your end of year tax income, you can voluntarily enter the PAYG instalment system by contacting the ATO on 13 28 61, or, if you are a sole trader with a myGov account linked to the ATO, by logging into the ATO’s online services for individuals.
- Take a look at our page on Register for Pay As You Go PAYG withholding page, to find out more about your tax obligations as an employer.
- There are a number of other taxes that you may be required to register for. To understand the different types that may apply to your business, and how to register, swing by our topic on Tax.
- If you're an independent contractor, your entitlements and obligations differ from an employee in many ways. Save time and money by being aware of your rights and responsibilities. Read our Independent contractors topic.