PAYG instalment lodging

Paying instalments towards an expected year-end tax bill for your business is what the pay-as-you-go (PAYG) instalment system is all about. Your business's actual tax liability will be worked out after the income year is complete, and the instalment payments made will be balanced against that to arrive at either a refund owed to you or a further amount to top up tax.

PAYG instalments are generally paid quarterly, although some companies are eligible to have an annual instalment option. Your first business activity statement (BAS) will show your options and ask which one you want to use (you can use only one option in an income year).

• its most recent notional tax was less than $8,000
• it is not registered or required to be registered for GST
• it is not part of an instalment group or a participant in a GST joint venture, and
• it is not the head company of a consolidated group.

If you are eligible to pay annually and decide to do so, you need to tell the Tax Office by the date on which your first quarterly PAYG instalment would otherwise be due. If you don't, the Tax Office will insist on quarterly instalments. The annual instalment is due by October 21.

For quarterly payers, the activity statements that arrive from the Tax Office will show any amounts due for any of the taxes that are reported on the BAS, including the PAYG instalment amount. If you balance accounts at June 30, use the following table to see your likely due dates:

There is also a twice-a-year PAYG instalment option, but this is only for primary producers or 'special professionals' such as sportspeople, authors or performing artists. In these cases, 75% of the estimated annual liability needs to be paid by April 28 and the rest by July 28.

There is the option for you to work out how much you think you should pay as an instalment rather than paying the Tax Office's automatically calculated amount, and an advantage to making this calculation is that your payments are based on your income as it is earned for each instalment period (so if you earn next-to-nothing, that's what you pay) instead of a projection based on a previous income year, which may not reflect your business's current realities. If you go down this path, you pay a proportion of business and investment income for the quarter (calculation is shown in the member section).

And just because you have kept up with the instalment payments does not mean you will not have to lodge an income tax return. This is, after all, the point at which the Tax Office will know if it owes you a refund or not, or if you owe it more money.

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