Pay as you go (PAYG) instalment is a system for paying instalments towards your expected tax liability on your business and investment income.
Your actual tax liability is worked out at the end of the income year when your annual income tax return is assessed. Your PAYG instalments for the year are credited against your assessment to determine whether you owe more tax or are owed a refund.
The Australian Taxation Office (ATO) writes to tell you if you have to pay PAYG instalments.
Your PAYG letter tells you:
- the assessment year used in calculations
- your PAYG instalment rate
- your tax on business and investment income
- your instalment amounts calculated by the ATO.
Calculate your PAYG instalments
As a PAYG instalment payer, you can choose between:
- paying the amount calculated by the ATO
- working out your own instalment amount - based on the ATO-notified instalment rate multiplied by your business and investment income.
An introduction to PAYG income tax instalments - Australian Taxation Office