PAYG Instalments

PAYG instalments are regular prepayments of income tax that the ATO requires from individuals, companies, and other entities that earn business or investment income that doesn't have tax withheld at source. If your instalment income (business and investment income) exceeds certain thresholds, the ATO will automatically enter you into the PAYG instalment system.

You typically enter the PAYG instalment system when your most recent tax assessment shows instalment income above approximately $4,000 and your assessed tax liability is above $1,000 (after accounting for PAYG withholding credits). Instalments are usually paid quarterly, aligned with BAS due dates. You can choose between the instalment amount method (ATO calculates a set amount per quarter) or the instalment rate method (you multiply your actual income by a rate the ATO provides).

PAYG instalments are not an additional tax — they are advance payments towards your annual income tax liability. When you lodge your tax return, all PAYG instalments and PAYG withholding paid during the year are credited against your total tax liability. If you've overpaid, you receive a refund. If your income has decreased significantly, you can vary your instalments downward, but be aware that penalties may apply if you vary too aggressively.