With endless terms and dates to remember when it comes to tax as a business owner, it can be hard to keep track of which payments are contributing to what tax obligations, if you’re ahead or behind on payments and how much you should’ve been putting aside every time an invoice is paid. Essentially… that’s why we have jobs 😉
PAYGI is something that will apply to most business owners at some stage and it’s well worth understanding what it is exactly they are.
What is a PAYGI?
Pay as you go instalments are quarterly payments made in advance, which go towards your next anticipated Income Tax liability. Rather than copping one lump sum amount at the end of the financial year, you’ll have already contributed significantly to the debt – if not have already paid it in its entirety. If you have overpaid, the Tax Return will result in a refund.
Can I vary my PAYGI?
We can vary your PAYGI should circumstances with your tax have changed (for example if you have previously worked for yourself, but are now an employee and being paid a wage).
You can reach out to us to discuss whether varying your PAYGI would be appropriate for you.
What happens if I miss a PAYGI?
If you miss a payment, it becomes just like any other debt with the ATO. It can accrue general interest charges and the ATO will likely start sending reminder notices to you regarding the overdue amount.
How do I set PAYGI up?
The ATO will automatically enter you into PAYG Instalments if you have the following (as an individual):
- Instalment income from your latest tax return of $4,000
- Tax payable on your latest Notice of Assessment is $1,000 or more
- Your estimated (notional) tax is $500 or more
Note: instalment income is the total income from your business and other investments (excluding capital gains income), before GST. For instance rental income and interest income are included.
If you think it would be beneficial for you to be in the PAYG Instalment system, you can voluntarily apply (we can also do this on your behalf).
A major benefit of pre-paying your tax liability quarterly is that it becomes more manageable from a cash flow perspective – bite size amounts to pay, rather than one big chunk! We also find it helps clients to budget better rather than that awful EOFY scramble trying to find the cash to pay in one hit.
Each quarter, the ATO will send a notice to you which will state the amount to pay, when it is due and the payment options available to you.
Need a hand? Get in touch.