What PAYG instalments are
PAYG instalments is a system that helps you manage your expected tax liability on income from your business or investments for the current income year by making regular payments.
Why vary your instalments
To assist taxpayers experiencing financial difficulty as a result of COVID-19, we are providing added flexibility to manage your instalments to suit your circumstances.
You can vary your instalments if you think using the current amount or rate will result in you paying too much by instalments when compared to your estimated tax for the year.
For the 2020-21 income year, we will not apply penalties or interest for excessive variations when you make your best attempt to estimate your end of year tax liability. However general interest charges may still apply to outstanding PAYG instalment balances.
Variations made in the 2019-20 income year do not carry over into 2020-21. You will need to vary your instalments again if you think you will pay too much tax in the 2020-21 income year.
You can vary your instalments multiple times throughout the year. Your varied amount or rate will apply for all your remaining instalments for the income year, or until you make another variation.
We encourage you to review your tax position regularly and vary your PAYG instalments as your situation changes.
You can lodge your variation on your business activity statement (BAS) or instalment notice.
If you are an amount payer
As an amount payer, the amount on your activity statement is set as a dollar amount.
You can vary your instalment amounts for the remainder of the year if either:
- you expect to have significantly less business and/or investment income than expected
- you expect your deductions against your business and/or investment income to be more than the income itself for the full year.
How to vary your instalment amount
On your activity statement, enter at:
- T8, the estimated tax for the year (if this is nil, enter 0)
- T9, the varied instalment amount for the quarter (if this is nil, enter 0)
- T4, the variation reason code (use reason code 23 – significant change in trading conditions).
- 5A, your PAYG income tax instalment amount (if you’re filling in a paper form, enter the amount from T9).
If you are a rate payer
The instalment rate is a percentage applied against the income you received for the period, so the amount you pay may go up or down..
You can vary your instalment rate to zero if either:
- you expect to have significantly less income than expected
- you expect your deductions against your business and/or investment income to be more than the income itself for the full year.
How to vary your instalment rate
Step 1
Estimate your instalment income for the year. Your instalment income is generally your gross business and/or investment income, excluding any capital gains.
See PAYG instalment income – T1 for a list of what it includes.
Step 2
Estimate the tax on your instalment income for the year. You can use the PAYG instalments calculator or our instructions to estimate the tax on your instalment income.
Step 3
Work out your varied instalment rate. You can work out your varied instalment rate by dividing your estimated tax by your estimated instalment income then multiplying by 100.
On your activity statement, enter at:
- T1 (PAYG instalment income), your instalment income
- T3 (varied instalment rate), your varied instalment rate (if varying to nil, enter 0)
- T11, the sum of your instalment amount (multiply T1 by T3)
- T4 (Reason code for variation) reason code 23 (significant change in trading conditions)
- 5A, your PAYG instalment income amount (if you’re filling in a paper form, enter the amount from T11).
Step 4
Complete any other questions on your activity statement as required.
How to claim a credit on PAYG instalments already paid
Once you have varied down your rate or amount, you can also claim back a credit from the PAYG instalments you have already paid in your current financial year. To do this, complete the amount at label 5B on your activity statement.
If you choose to not claim back your credits on your activity statement and you overpay your PAYG instalments, you will be credited with them after your tax return is processed.