PAYG income tax instalment
The PAYG instalment section of the activity statement should only be completed if the ATO has advised an amount at T2 on the pre-printed Statement.
If you do not have any instalment income for this period, key zero at label T1.
There are two options for reporting and paying PAYG instalments on either the BAS or the IAS.
Option 1: Pay PAYG Instalment amount as advised by the ATO
Option 2: Calculate PAYG instalment using income tax rate
Option 1: Pay PAYG Instalment amount
If this option is chosen, complete Label T7. If you are going to vary the Instalment amount as issued by the ATO, complete Labels T8, T9 and T4 as well.
If this method is chosen, you cannot revert to option 2 until the next income year.
Label T7: ATO Instalment Amount
This is the ATO calculated instalment amount. It is printed on the paper Activity Statement provided to the taxpayer and has been calculated by the ATO based on information taken from the most recent assessment for the most recently lodged return for the taxpayer.
Label T8: Estimated Tax for the year
If the instalment amount as advised by the ATO does not correctly reflect the taxpayer's changed circumstances nor reflect the expected tax liability for the year, you estimate the income tax for the year and enter that figure at T8.
Label T9: Varied instalment for the quarter
Enter at this field the varied instalment amount for this quarter. You would calculate this by deducting the amount of PAYG Instalments already paid and dividing the remainder by the number of quarters left to pay.
Label T4: Reason code for variation
If the instalment is being varied, a reason for the variation must be given. Therefore select the code that reflects the reason from the list at T4.
For Option 1 the list of codes offered are:
21 Change in investments
22 Current business structure not continuing
23 Significant change in trading conditions
24 Internal business restructure
25 Change in legislation or product mix
26 Financial market changes
27 Use of income tax losses
28 Intends to enter the STS
29 Intends to leave the STS
Option 2: Calculate PAYG instalment using income tax x rate
If the instalment amount as advised by the ATO does not correctly reflect the taxpayer's changed circumstances nor reflect the expected tax liability for the year, you calculate the varied instalment rate to apply to the instalment income and complete labels T1, T3 and T4.
Label T1: PAYG Instalment income
The Instalment income as advised by the ATO will be contained on the taxpayer's printed statement for the period or will have been advised to the Agent in an Activity Statement Report. If you intend to vary the Commissioner's instalment rate, the instalment income and the instalment rate need to be calculated and entered at T1 and T3. You can use the PAYG Instalment Rate estimate (Preparation > Schedule > xPI) to assist in this calculation.
Label T2: Commissioner's rate
The Commissioner's Instalment rate will be shown at Label T2 on each activity statement and is also advised to ELS Agents via the Activity Statement report where the Agent has advised the ATO that the taxpayer is a client of the firm.
For the first PAYG instalment for the income year: The instalment rate shown at Label T2 will be the Commissioner's instalment rate. The business should have already been notified of this rate and how it was calculated. If not, contact the ATO on 13 24 78 to obtain the worksheets.
For the second and subsequent instalments for the income year: The instalment rate pre-printed at Label T2 will be the instalment rate used to calculate the amount of the previous PAYG instalment for the income year. It will either be the Commissioner's instalment rate or, if the business has chosen its own rate for the previous instalment rate, it will be the chosen instalment rate (that is, the varied rate).
Enter the instalment rate shown at Label T2 or choose a pre-calculated instalment rate.
Label T3: Varied rate
Complete this field only if you are varying the Commissioner's instalment rate. You can use the PAYG Instalment Rate estimate (Preparation > Schedule > xPI) to assist in this calculation. The instalment rate can be varied, if the instalments worked out using the instalment rate shown at Label T2 will not adequately reflect the taxpayer's expected tax liability for the year.
If another instalment rate is chosen, use that varied rate for each subsequent quarter in the income year unless another rate is chosen for a later quarter.
The varied instalment rate will not carry over to the next income year.
The ATO must be notified of the varied instalment rate as well as the instalment income before the due date of the instalment. The instalment rate chosen for a quarter cannot be revoked after the ATO has been notified of the rate.
The business may be liable to pay interest if the varied instalment rate is less than 85 per cent of the instalment rate that would have covered the actual liability for the income year. The ATO will calculate that instalment rate based on the instalment income and adjusted assessed tax for the year.
This is calculated as T1 x T2 OR T1 x T3
Label T4: Reason code for variation
Select one of the following reasons to explain why the instalment rate at Label T2 has been varied at Label T3:
12 Change in any legislation OR
one of the reasons from the list provided under Option 1 above.
If you vary the rate, the ATO must be given a reason for the variation.