Investment income & paying tax

Completely theoretical question for me because I'm only just starting out but does there come a point where you need to start paying tax regularly every month/quarter for your investment income the same way an employee's income tax gets paid monthly/quarter by their employer?


Like could I earn $100k/$200k/$300k/$400k in rent, interest and not have to pay tax until my accountant does my tax return or do I need to make allowances for regular tax payments?

As mentioned I'm no where near any of those levels but hope to be one day

 

Yes. Its called PAYG Instalments.

When a taxpayer lodges their return the ATO use voodoo magic formulas to identify untaxed income. When it exceeds parameters then the ATO sends the taxpayer a "welcome"letter and it calculates an amount to be paid for (example) the 2020 tax year.

If its fulfills certain parameters the taxpayer may get to choose to pay a single annual instalment and that would be due in October 2020 (after the tax year ends) but otherwise the instalments commence after the letter and are paid each quarter. ie late July, late Oct, late Feb and late April. Some taxpayers also choose to use the rate method which gives them a % rate and for all untaxed income they report this x that rate. This method can lead to penalties if the form isnt lodged on time and isnt always a better approach.

When the 2020 return is lodged a credit is given for the instalments paid.

Each quarter the taxpayer can vary the instalments if they consider them excessive. vary to $0 isnt an acceptable choice unless taxpayer circumstances change. There after they still issue $0 notices just in case matters change again and a instalment is required. The obligation to review occurs every quarter. They arent obliged to but they can also vary upwards. Penalties apply for variations that are false.

Each year the instalment amount is recalculated. If that income ceases the ATO will cancel the PAYG Instalment registration.

 

Thanks @Paul@PFI!

I thought it might be something like that, I've received the "welcome" letter in relation to my businesses but only recently thought the same applies in regards to investment income.

 

We received a please explain / welcome letter last year.

Long story short: Goto the ato website, download monthly tax table..

Workout (before agent fees) how much rent you recieve for the properti(es).

Ie: Agent recieved $1,845 each month in rent, then deductions xommision / services rendered (guttering).

Just note the actual cost of $1,845. Look up the tax payable on that monthly income (or nearest $$). Set it up on auto dial through your credit card (100% seperate cc for rental / tax deduction purposes!).

You could either pay monthly, or in 1 lump sum (monthly cost × 12).

If you like using airline programs, you could even earn points!

 

Many cards dont credit points when paying the ATO. Check your card provider. A large number have scaled back payments through the egateway and exclude them much like a cash advance is excluded.

https://www.finder.com.au/can-you-earn-rewards-points-on-ato-bills-this-eofy