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Why do I have to pay Pay As You Go (PAYG) income tax instalments when I also have to pay income tax at the end of the financial year?

PAYG income tax instalments are intended to cover your expected income tax liability for the current financial year. You only have to pay PAYG instalments if you earn business and/or investment income and generally, for individuals and trusts, only if you reported $4,000 or more of business and/or investment income in your last tax return. The ATO uses your most recent previous year’s tax return to estimate your income tax liability for the current year and then divides it into four quarterly instalments. In doing this, the ATO expects that at the end of the financial year your income tax liability will either be paid in full or there will only be a small amount still owing. Should your actual income tax liability be less than what the ATO estimated and you’ve paid more than you need to, you will be refunded the excess amount.

Click here for more details on PAYG Instalments.

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