Varying PAYG instalments: things to know

By James Moore, Manager

17 April 2022

Taxpayers are given the choice to vary these instalments if they believe the payment(s) they’re requested to make will either result in them paying too much or too little tax for the income year. For a variation to be done, this needs to be actioned on or before the due date for payment. Once a variation has been done, this will apply to all the remaining instalments unless another variation is made prior to the end of the financial year.

An example would be if you had paid $6,000 in total over the PAYG instalments for the September, December and March quarters (i.e. $2,000 per quarter) but estimate your total tax for the financial year will be $7,000. Before the date the $2,000 payment is due to be made for the June quarter, you could vary the June instalment to $1,000, giving a total of $7,000 ($6,000 + $1,000) of PAYG instalments paid for the financial year. This will be deducted from the actual tax calculated when the tax return is prepared to give you a refund, nothing more to pay or an additional payment.

It is important to note that a penalty can apply if the ATO believes you have been unreasonable in estimating your end of year tax liability. However, for the 2021-22 income year, no penalties or interest charges will be applied for these unreasonable variations. For further information head to the the Additional support during COVID. On other occasions, if your varied instalments are less than 85% of your total tax payable, you may have to pay a general interest charge on the difference, in addition to paying the shortfall. Depending on the circumstances there may also be penalties.

The ATO encourages taxpayers to continuously monitor their tax position and utilise the option to vary the instalments if there is a situational change.

Speak to your Brentnalls SA team member if you would like further information or assistance with your next PAYG Instalment notice or call us to discuss further.

Disclaimer

The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.