If you earn business or investment income — for example from renting property, dividends, interest or self-employment — using a system called Australian Taxation Office (ATO) PAYG instalments can help you spread your tax payments across the year.
What are PAYG Instalments
PAYG instalments allow you to make regular payments during the financial year toward your expected tax liability, instead of receiving a lump-sum tax bill when you lodge your return.
Those payments are credited against your final tax assessment — so if you’ve paid enough, you’ll avoid a big tax bill at the end of the year.
Who Gets Put into PAYG Instalments
You may find yourself in the PAYG system automatically if, based on your latest tax return:
- Your “instalment income” (business or investment income) was $4,000 or more, and
- Your tax payable was $1,000 or more, and
- Your “notional (estimated) tax” was $500 or more. If you expect to earn business or investment income above those thresholds in the coming year — but didn’t meet them this time — you can also voluntarily opt in to PAYG instalments.
If you expect to earn business or investment income above those thresholds in the coming year — but didn’t meet them this time — you can also voluntarily opt in to PAYG instalments.
How PAYG Instalments Are Calculated
When it’s time to pay, you’ll usually get either an activity statement, or an instalment notice from the ATO.
You’ll typically have two ways to calculate what you pay:
| Option | What you do |
| Instalment Amount | Use a fixed dollar-amount the ATO calculates for you — easy and predictable. |
| Instalment Rate | Use a rate supplied by the ATO, multiply it by your business or investment income (gross, before GST) — useful if your income fluctuates. |
When your income changes significantly, you can vary (adjust) your instalment amount or rate.
When Payments Are Due
For most people, PAYG instalments are due quarterly, on the following schedule:
| Quarter | Period | Due Date* |
| 1 | July–September | 28 October |
| 2 | October–December | 28 February |
| 3 | January–March | 28 April |
| 4 | April–June | 28 July |
* If you lodge online, you may get a 2-week extension.
In some cases — if you have very high income — you might pay monthly. That typically applies to businesses with large revenue.
Why Use PAYG Instalments
Avoid a big tax bill at the end of the year — paying gradually spreads the cost.
- Makes cash flow smoother for people with variable or investment-based income (rental, dividends, trust distributions, etc.).
- Helps you budget and plan — you know roughly how much tax you’ll pay each quarter/period.
- Less risk of surprise tax liabilities when lodging your yearly return.
Things to Watch Out For
- If your income drops suddenly, paying the default instalment rate or amount may mean overpaying tax — so it’s worth reviewing or varying instalments.
- Conversely, if you under-estimate your income and underpay, you might owe extra at tax time — or incur interest/penalties.
- PAYG instalments cover only business & investment income — they don’t replace PAYG withholding (the tax employers withhold from wages).
Is PAYG Instalments Right for You?
If you’re a sole trader, investor, landlord, or someone with irregular income from business or investments — PAYG instalments can be a smart system to avoid large tax bills and keep your cash flow steady.
Source: www.ato.gov.au
