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Pay as you go (PAYG) instalments

If you earn income from investments such as interest, dividends, rent or royalties, using PAYG instalments will help reduce a potential tax bill when you lodge your tax return.

How PAYG instalments work

PAYG instalments allow you to make regular payments during the financial year towards your expected end of year tax liability.  This will reduce any potential amount you may have to pay when your tax return is lodged.

Automatic entry

The ATO will enter you into PAYG instalments if you have any of the following:

  • instalment income, including investment and business income, based on your latest tax return of $4000 or more
  • tax payable on your latest notice of assessment of $1,000 or more
  • estimated (notional) tax of $500 or more.

Voluntary entry

If you’re expecting to earn business and investment income over the threshold, you can voluntarily enter PAYG instalments.

Calculating your PAYG instalments

There are 2 options available to work out how to pay:

  • instalment amount is the simplest option, as you pay the amount the ATO calculates for you
  • instalment rate is when you work out the amount you pay using your investment income and allowable tax deductions and the rate the ATO provide.

Varying PAYG instalments

You can vary the instalment if your investment or business income reduces or increases compared to the prior financial year.  Variations must be lodged with the ATO on or before the day your instalment is due.

Download a copy of the factsheet on Pay as you go (PAYG) instalments  or for more information go to the ATO website.


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