Understanding PAYG Instalments

You regularly prepay the tax on your business and investment income using pay as you go (PAYG) instalments.

When you get revenue from a business or an investment, the PAYG instalments system may start up automatically, or you may choose to do so willingly.

  1. Managing Your Tax via PAYG Instalments

    Planning for your income tax is essential to maintaining a healthy cash flow, regardless of whether you own your business or receive investment income.

    PAYG instalments make this possible. The process is as follows:

    • The PAYG payments system is where you go. Either you are allowed to enter automatically, or you can ask to be entered.
    • You make consistent payments (instalments) throughout the year, typically every three months. Your payment is determined by the revenue from your business and investments.
    • The PAYG instalments you paid throughout the year are deducted from your tax when you file your tax return, leaving you with little to no tax to pay.


    What Is PAYG Withholding?

    PAYG withholding is different from PAYG instalments. Employers can prevent employees from receiving a big tax bill at the end of the year by withholding tax from employee payments and sending it to the ATO (Australian Taxation Office). This is known as PAYG withholding.

    Automatic Entry To PAYG Instalments

    When you file your Australian tax return, the ATO (Australian Taxation Office) will enrol you in the PAYG instalment system if your income exceeds the threshold.

    They’ll inform you of:

    • the choices available for calculating your instalments.
    • how frequently you must file and pay.


    The ATO (Australian Taxation Office) will automatically remove you from the PAYG instalments system if your income no longer matches the cutoff. You can submit a request using the ATO’s online services if you want to leave the system because your circumstances have changed (for example, your income has decreased).

    Voluntary Entry To PAYG Instalments

    It’s an excellent idea to voluntarily enter PAYG instalments if you are starting a business or if you believe your business or investment income will result in a profit.

    You can improve your cash flow and prevent a big tax payment when you file your tax return by prepaying your tax via PAYG instalments.

    How To Begin Voluntary PAYG Instalments?

    To begin with voluntary PAYG instalments:

    • Calculate the tax you’ll have to pay.
    • Submit a request to join the PAYG instalments system
    • Pay your PAYG instalments.


    Contact KPG Taxation for more information.

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