Blog Layout

Understanding PAYG Instalments.

If you're running a business or earning investment income, you’ve likely come across the term PAYG instalments — but many people still aren’t clear on what they are, how they work, or why they're important.


In this article, we break down PAYG instalments and explain what you need to know to stay on top of your tax obligations, avoid penalties, and manage your cash flow with confidence.

 

What are PAYG instalments?

PAYG (Pay As You Go) instalments are regular pre-payments of your tax, made throughout the financial year. They’re designed to help individuals and businesses avoid a big tax bill at the end of the year, by splitting the bill into smaller payments throughout the year.


The system applies if you earn income that hasn’t had tax withheld — for example:

  • Business income (as a sole trader, company, or trust).
  • Investment income (such as rent, dividends, or interest).

Instead of paying your full tax bill at tax time, you pay portions in advance, based on the income you earned last year.

 

How do you know if you’re in the PAYG system?

“How did I get here!?”. This is a question a lot of people have.


You’re automatically enrolled into the system based on your tax return. The ATO will notify you if you’ve entered the PAYG instalment system. This typically happens after you lodge your tax return, and the ATO determines that your income meets the threshold for PAYG.

 

The ATO automatically adds people to the PAYG system if:

  • Your business or investment income is over $4,000 (individuals).
  • You had at least $1,000 in tax payable on your last return.
  • You're not already paying enough tax via PAYG withholding (like employee wages).

If you’re unsure, check your myGov account, or speak with us — we can check your ATO account and confirm your PAYG status.

 

How are PAYG instalments calculated?

Your instalment amount is based on your last lodged tax return. The ATO uses your reported income to estimate your likely tax bill and then splits it into quarterly payments. For example, if your 2023 return showed $60,000 in business income, the ATO will estimate your 2024 tax and issue PAYG instalments based on that.


This is helpful — but not always perfect. If your income is higher or lower this year, you may want to vary the instalment amount.

 

If you’re going to vary your instalment, do it early.

If your income has changed — up or down — you can vary your PAYG instalment to better match your current situation. But there’s a catch… You must lodge the variation before the due date of the instalment.


For example, if your next instalment is due 28 April, you must submit the variation before that date. Once the deadline passes, the amount is locked in — even if your actual income is lower than expected.


Also, varying too low without reasonable basis may result in interest charges or penalties, so always check with your Accountant before adjusting.

 

When are PAYG instalments due?

If you’re in the PAYG instalment system, you usually need to pay quarterly on the 28th of July, October, January, and April. So, four times a year, by or on the 28th of those months. It’s essential to make your payment on time — missing a deadline can result in interest charges or penalties from the ATO.

 

Where to find your PAYG instalment notice.

The ATO won’t always send you a letter in the mail. If you’re an individual or sole trader, your PAYG instalment notices will appear in your myGov account, under your linked ATO services. You must check your myGov inbox each quarter. If you don’t, you could easily miss a payment date — and that can cost you.

If you run a business and use a tax agent or BAS agent, the notice can also be accessed through your business portal or agent’s portal. However, you must check your myGov account and business portal.

 

Opting out of PAYG instalments (spoiler alert: you can’t).

Many clients ask us whether they can opt out of PAYG instalments. The short answer is: no — you can’t simply opt out for convenience.

However, in certain cases, you can request to be removed from the PAYG instalment system entirely. This usually applies if your business or investment income has dropped below the ATO’s threshold and is not expected to return to that level. You or your Accountant can make this request to the ATO, and if they accept it, you may be taken out of the system. Alternatively, if your next tax return shows income below the threshold, the ATO may automatically remove you.

 

The bottom line.

PAYG instalments help smooth out your tax payments across the year — but they only work if you stay on top of the due dates, check your myGov notifications, and update your payment amounts if your income changes.

We help business owners and investors across Perth manage their PAYG obligations with confidence and clarity. Whether you’re new to the system or want help varying an instalment, we’re ready. Get in touch with Ascent today.

Need help with your accounting?

Find Out What We Do
April 14, 2025
Thinking of buying or selling a business in 2025? Now might be the perfect time to make your move. With interest rates tipped to drop, new regulations coming in 2026, and a surge in buyer activity, the opportunities are out there. Click the link to learn more.
April 14, 2025
Thinking of selling your business? Buyers are looking at three key components: Goodwill, Plant & Equipment and Stock. Did you know they impact how much tax you’ll pay?
April 14, 2025
From adding a bedroom to updating flooring or a kitchen refresh, smart changes can boost rental income and capital value. Learn more in our latest article.
March 14, 2025
If your business interacts with the public — whether through customers, suppliers, events, or onsite work — public liability insurance can protect you against claims for injury or property damage. This generally covers legal costs and compensation, and although it’s not legally required, being sued for negligence can be costly (and bad for your business rep), so it’s highly recommended.
March 14, 2025
Co-owning a property can be a practical and financially beneficial arrangement, but when circumstances change, sometimes one party needs to jump ship. Whether due to financial strain, health issues, relocation, relationship breakdown, or differing property goals, it’s not uncommon for one co-owner to buy out the other. While this process may seem straightforward, there are several financial and legal considerations to consider.
March 14, 2025
Most people who sell a property — especially if it’s their first time doing so — are surprised (and frustrated) at how complicated it can be. Expenses (expected and unexpected) are a big part of that — and there are numerous costs throughout the process. These include real estate agent fees, legal expenses, marketing costs, and property preparation. Understanding and anticipating these expenses beforehand can help ensure a smooth and well-prepared road ahead.
More Posts
Share by: