Have you been paying quarterly PAYG instalments to the ATO for a while and suddenly get a notification that the amount has changed? Its a common question we hear – why have my quarterly PAYG instalments increased?
Firstly, make sure you’re reading the right document. When you have a change of circumstances (like lodging a tax return), the ATO recalculates your quarterly instalment and sends you a notice to inform you. The amount showing here is your annual liability which is an information notice, not a payment notice. You’ll get your payment notices separately on a quarterly basis.
Make sure you are looking at your quarterly payment notice (they are a pinky colour). If your instalments have increased substantially from the previous year, it will generally be as a result of a spike in income from one tax return to the next.
This happens because your instalments are calculated based on the previous tax return that the ATO has a record of. The minute you lodge a new tax return, with increased earnings (especially from an untaxed source like interest or business earnings), the ATO will increase your instalments to compensate for the increase when the next return gets lodged. This increase could happen during any of the four quarters of the year, depending on the timing of other events.
Pro tip
The timing of lodging your tax return can impact substantially on the calculation of your next PAYG quarterly instalment. Talk to your tax professional to understand this before making a decision on when to lodge.
Author: Nick Vincent
Email: nick@faj.com.au
