# ATO: entry into PAYG instalments system



## Jack Malarkey (Jan 11, 2016)

Australian Taxation Office:









Starting PAYG instalments


You may be required to make pay as you go (PAYG) instalments when you earn business and investment income.




www.ato.gov.au





*Starting PAYG instalments*

You use pay as you go (PAYG) instalments to make regular prepayments of the tax on your business and investment income.

You may automatically enter the PAYG instalments system when you earn business or investment income, or you can voluntarily start PAYG instalments.

On this page

Using PAYG instalments to manage your tax
Automatic entry to PAYG instalments
Voluntary entry to PAYG instalments
*Using PAYG instalments to manage your tax*

Whether you run your own business or earn investment income, planning ahead for your income tax is important to help you keep a healthy cash flow.

PAYG instalments help you do this. This is how it works:

You enter the PAYG instalments system. We may enter you automatically, or you can ask to be entered.
You make regular payments (instalments) during the year, usually once every 3 months. The amount you pay is based on your business and investment income.
When you lodge your tax return, the PAYG instalments you have paid during the year are offset against your tax, leaving you with little or no tax to pay.
PAYG instalments are different to PAYG withholding. With PAYG withholding, employers collect tax from the payments they make to their employees, and send it to the ATO, so employees do not have a big tax bill at the end of the year.

*Automatic entry to PAYG instalments*

If you lodge a tax return with instalment income above the entry threshold, we may contact you about paying PAYG instalments.

*Entry thresholds*

We work out whether you need to pay PAYG instalments based on information you reported in your latest tax return.

One of the things we look at is your instalment income. This is your gross business and investment income, excluding GST and any capital gains.

If you are an individual (including a sole trader) or trust, you will automatically enter the PAYG instalments system if you have all of 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, and
estimated (notional) tax of $500 or more.
A company or super fund will automatically enter the PAYG instalments system if any of the following apply:

it has instalment income from its latest tax return of $2 million or more
it has estimated (notional) tax of $500 or more, or
it is the head company of a consolidated group.
*How you start paying instalments*

We will let you know when you have entered the PAYG instalments system.

If you are registered for myGov with a linked ATO account, you will receive a letter in your myGov Inbox.
If you have Online services for business, or Standard Business Reporting software, you will receive your instalment information 21 days before the due date.
If none of the above applies, you will receive a paper letter in the mail.
If we have your phone number we will also remind you via SMS.

When we contact you, we will let you know:

when to pay
how often to pay – this depends on your circumstances, but most people pay quarterly
how much to pay, including your options for calculating your instalments.
You will start making payments once we send you an activity statement or instalment notice.

*Voluntary entry to PAYG instalments*

If you are new to business, or you think you will make a profit from your business or investment income, it's a good idea to voluntarily enter PAYG instalments.

Prepaying your tax through PAYG instalments will help you smooth out your cashflow and avoid a large tax bill when you lodge your tax return.
This video shows how you can start voluntarily paying instalments.

*How to start voluntary PAYG instalments*

To get started with voluntary PAYG instalments:

Estimate the amount of tax to pay
Make a request to enter the PAYG instalments system
Pay your instalments
*Step 1: Estimate the amount of tax to pay*

You need to estimate your annual business and investment income, and your allowable tax deductions, so you can work out the amount of tax to pay by instalments.

To do this you can use the PAYG instalments calculator.

PAYG instalments calculator

If you prefer, you can manually estimate the tax on your instalment income.

Once you have worked out your PAYG instalment amount, you can work out how much money to put aside to cover your tax instalments.

How often you pay depends on your circumstances.

Example: estimating PAYG instalments


Danielle runs a business as a sole trader. She estimates she will earn business income of $100,000 for the financial year, with allowable business tax deductions of $10,000.

Danielle uses the PAYG instalments individuals calculatorand enters her:

estimated business income of $100,000
estimated taxable income of $90,000 (business income less business tax deductions).
The calculator estimates her PAYG instalment amount to be $20,437 per year.

Danielle divides her estimated instalment amount by 52 to work out how much to put aside each week for PAYG instalments: $20,437 ÷ 52 weeks = $393.02

When she receives her quarterly business activity statement (BAS), Danielle has enough money put aside to pay her PAYG instalment for the quarter.

When she lodges her tax return, the PAYG instalments she has paid throughout the year will be offset against her tax liability, meaning she has little or no extra tax to pay.

End of example

*Step 2: Make a request to enter the PAYG instalments system

Individuals, including sole traders*

If you are an individual taxpayer or sole trader, you can make a request to start PAYG instalments using your myGov account linked to the ATO's Online services.

Select Tax > Manage > Enter PAYG instalments.

*Individuals and businesses*

You can request voluntary entry through your registered tax agent or by phone:

13 28 66 for businesses
13 28 61 for individuals not in business.
If you or your agent phones us, we will ask a few questions about your circumstances.

*Step 3: Pay your instalments*

Once you have entered the PAYG instalments system, you will receive activity statements or instalment notices showing your instalment rate or amount.

You can view, manage and pay your instalments online.

Make sure you pay your instalments by the due date.

If you think you might end up paying too much (or too little) for the year you can vary your PAYG instalments.


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## Senti-Ant (Jan 17, 2020)

Jack Malarkey said:


> Australian Taxation Office:
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You can also get payment plans setup for your PAYG instalments if you're unfortunate enough to have entered this system that basically means you pay your tax early!!!


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