The entity may be entitled to a credit from earlier instalments for the same income year if a varied instalment rate was used and the varied instalment rate is less than the ATO instalment rate.
A variation credit will occur only when those earlier instalments were worked out using a higher instalment rate. This credit is offset against the other liabilities on the activity statement (that is, it will be included in the net amount payable or refundable on the activity statement).
Instalments for earlier quarters: Enter the instalments for each quarter. These amounts have been entered at Label 5A of previous activity statements of the income year. Include any amounts not yet paid.
Credits claimed for earlier quarters: Enter the credits claimed for each quarter in the income year. These amounts have been entered at Label 5B of previous activity statements of the income year.
Instalment income for earlier quarters: Enter the instalment income for each quarter in the income year. These amounts have been entered at Label T1 of previous activity statements for the income year.
Instalment rate used for the current quarter: Enter the rate for calculating a percentage of the instalment income (in Step 3., above).
Amount of credit available to claim: This amount is calculated as follows:
Instalment income x Instalment rate - Net instalments paid
If the result is positive, this is recorded at Label 5B as the amount of credit claimed.
Company XYZ has paid earlier instalments of $12,000 and $10,000.
It claimed a credit of $4,000 in the second instalment quarter.
It decides to vary its instalment rate for the third quarter to 8% because of a reduction in the profit margin on sales due to increased competition. Company XYZ had varied its instalment rate for the second quarter to 10% and this is shown at Label T2.
The total instalment income from the earlier quarters during the income year is $180,000.
As Company XYZ's varied instalment rate is less than the instalment rate shown at T2 the company is entitled to a credit from earlier instalments for the income year.
$12,000 (earlier instalment)+$10,000 (earlier instalment)
$4,000 (total of earlier credits)
$22,000 (Step 1) - $4,000 (Step 2)
$180,000 (instalment income for earlier instalment quarters)
$180,000 (Step 4) x 8% (varied rate)
$18,000 (Step 3) - $14,400 (Step 5)
Company XYZ can claim a credit of $3,600. Record this at Label 5B.