Quarterly PAYG instalment notices

If the ATO has decided that you need to pay Quarterly PAYG instalment notices due to making "too much" income the last financial year then this financial year you have been paying the set amount that the ATO has written on this form every quarter, say you don't make any income or make a loss this financial year, when you do the tax returns does the ATO refund all this money you've been paying them every quarter and if so, do they pay you interest on this? In effect you've been giving the ATO an interest-free loan then which is ridiculous. Is there any way of not giving them an interest-free loan like this? I guess you could vary the 1st form and write $0 then you wouldn't have to pay any PAYG instalments but what happens if you do that and are way off as you have no idea what income (or loss) you could make in the financial year?

 

No.

 

You can vary your payg instalments each quarter. By the june quarter you would have a very good idea of your expected liability

If you vary it too much and you have a tax liability they can apply a penalty.

 

If you overpay the PAYG instalments it will be refunded to you.

You are not paid interest if you overpay and you receive a large tax refund at year end. You are not charged interest if your income increases massively and you have a large tax liability at year end.

 

Don't worry about it. Look forward to when they make you pay the instalments monthly.

 

I already pay my expected instalments monthly.

Monthly rent (before agent fees) viewed on the monthly wage ato info.

So worse thing is a part refund, but best arr esrning points on the cc.

 

Wait, what now? Are you saying you still rack up cc points if you pay your tax bills on the credit card? Far out, round the world tickets coming up!!

 

A guide to credit cards that earn points with ATO payments - Point Hacks

 

Below is the tax table I'm currently using (check each year for ATO Updates), which I'm treating it as a 2nd job (No tax-free threshold).

It also depends on where / which sites you pay the ATO bill, as it depends on how the banks treat the transaction.



https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/Monthly-tax-table-2018-19.pdf

 

Voluntary prepayment of expected tax ahead of time CAN earn interest :
Credit for interest on early payments

For those individuals who do this its important they know as its is something you may apply for. You need to calculate each early payment and then claim the total sum. I have a handful of clients who do this. There is strategy of deferring the lodgement to enhance the outcome too. Only tax agents can maximise that benefit.

But no interest is payable when the ATO issue an instalment notice. That an obligation. Even if its paid early.

 

It is kind of ridiculous for the ATO to make you pay PAYG instalments based on their calculations from last year's tax when you make most of the income from share trading then if you vary the form and end up with a tax liability they will financially penalise you. How can someone really know exactly how much they will make (or lose) at the beginning of the financial year in share trading or in any other business? Nothing is set in stone. The only time anyone can have a reasonable idea is a month or maybe two month's before the EOFY. By that time you'd already paid the PAYG instalments four times at the ATO's rates. People who are employees don't have to give the ATO one year or more interest-free loans then claim it back on the tax return, they get their tax taken out based on their actual income each week.

 

Bring back Provisional Tax!

 

PAYG Instalments are the old provisonal tax. Same same.

The PAYG system allows all taxpayers to vary up or down. Its flexible. For example if your share trading profits vary continually then if the Q1 profit was say $400 the instalment you pay can be varied to reflect say $150 tax payable. If its grown to $12,000 at Q2 then this could be varied up so it reflects what seems like 50% of the tax on $12K. And then Q3 to 75% of the estimated tax for the year.

If you vary down then in later quarters you may have to later vary up. But if you dont vary down then the ATO requested sum is the only amount you MUST pay. Any shortfall is the taxpayers choice to pay after assessment.

You trade without knowing if you make a profit or a loss ?? I dont believe that. I'm sure you can determine a YTD estimate of how things are progressing through the course of the year on a quarterly basis. That is the end of each quarter after you have traded. Nobody pays tax based on a guess made on 1st July each year and that not how it works with the ATO either. I dont accept you just wing it and hope its a profit. It suggests you need to improve your records so you can keep track of how things are progressing at any point in time.

 

I do forex trading and I can tell you if you don’t have a trading journal showing your trade plans and trades executed you are doomed for failure

No different in share trading. If you don’t know your profits on a daily basis it’s time you started.

 

I used to buy forex too. Easier to buy in QLD but many hotels in other states now serve it

 

..so, if you want to vary down your payment, is it as simple as filling in the amount you actually want to pay through the portal then top up any shortfall at year end (if there is any)? Do you get a friendly call from the ATO if you vary it down, asking why?

This year we'll have a bumper year (for many reasons). I'll be paying the extra tax at the end of the year on top of the quarterly payments I've already made (based on last years income). Next year though, won't be anything like as high an income but they'll base the payments on what I'll be submitting this year. Just wondering then if, next year, I can simply vary my payments down based on what I know my actual income will be through the year?

 

Now that you've come of age, you buy a beer the Qlders can't spell?

 

You are required to have paid 50% of years estimated tax estimated by Q2 (31 December). The ATO then will issue notices for remaining instalments of 25% of that annual sum in Q3 and Q4 assuming you didnt choose the instalment rate method in the first quarter. If so you are obliged to calculate the net income (ex GST) for each quarter x the rate provided. The rate however can be varied to meet the 50% target at 31 December and so on.

The ATO will only contact you if you didnt correctly complete the variation. And if you do it late. . The call will be from the team chasing the underpaid tax !! But at year end if you have a shortfall caused by the variation it can result in a letter + penalties if there isnt a lawful reason. I have seen people vary very large amounts to $0 and no questions are asked. But in theory they can.

Next year vary Q1 down and then they will expect the same amount thereafter. Then when you lodge 2019 tax you may need to vary again.

 

Hi Paul, just wondering if you can explain this further,
I got a letter stating I'm entered into the PAYG installments system because last fy I did some extra work on Airtasker, I do not see myself doing much or any airtasker stuff this yr due to change in circumstances.

I have a rental property which they have included aswell- I have had this for 3 years now which pulls in gross income above the installment entry threshold but they didn't enter me back then? Is there a way to get out of this if I earn $0 from airtasker in Q1?

Previous years I normally get a little bit of a return as my work deductions more than offset my rental income. Last FY my tax liability was only $1,000 but the ATO calculated my quarterly payments at $850

 

1. Do you have a letter or a notice ? A letter is issued first. Then an instalment notice. The letter is very clearly worded. Except some people dont seem to read. Seek tax advice if that too hard

2. Only a notice can be varied provided its done before the due date. You will vary based on the annual expected unearned taxable income (eg non salary). Or if ou choose the % method you can include the quarterly unearned income and multiply that by the %.
$0 x 50% = $0

3. Rental net income or a net loss ?