Varying Your PAYG Instalments Due To COVID-19
Are you a pay-as-you-go (PAYG) instalment payer? If yes, you can vary your PAYG instalments. This is only applicable if you have been affected by COVID-19. PAYG is a payment system that allows you to manage your expected tax liability on income from business or investment for the current financial or income year by making regular payments.
Due to this pandemic, the govt. has allowed the individuals and businesses to vary their instalments on the activity statement, in case, they think that using the current amount or rate will make them pay too much by instalments when compared to the estimated tax for the year.
Who Can Vary PAYG Instalment?
The ATO said, “We will not apply penalties or charge interest on varied instalments that relate to the 2021-22 income year, when you have taken reasonable care to estimate your end of the year tax liability.”
Varying the PAYG instalments apply to the 2022 income year for 30 June ordinary balancers and entities with a substituted accounting period (SAP). SAP is accounted for entities having any variation related to the instalments made in 2022 income year.
ATO is encouraging individuals to review their tax position regularly throughout the year and vary PAYG instalments as your situation changes.
How To Vary Your Instalment Amount
If you are an amount payer, you can vary your instalment amount for the remainder of the year:
- In case, you expect to have less business or investment income than expected.
- If you expect the deductions against your business or investment income for the year to be more than the income itself.
Steps to vary your instalment amount (for amount payer)
On your activity statement, enter at:
- T8 – the estimated tax for the year (if this is nil, enter 0)
- T9 – the varied instalment amount for the quarter (if this is nil, enter 0)
- T4 – the variation reason code (use reason code 23 – significant change in trading conditions)
- 5A – your PAYG income tax instalment amount (if you’re filling in a paper form, enter the amount from T9)
If you are a rate payer, you can vary your instalment rate down:
- In case, you expect to have less income than expected.
- If you expect your deductions against the business or investment income to be more than the income itself.
Steps to vary your instalment rate (for rate payer)
- Estimate your instalment income for the year.
- Estimate the tax on your instalment income for the year.
- Work out your varied instalment rate. On your activity statement, enter at:
- T1 PAYG instalment income – your instalment income
- T3 Varied instalment rate – if varying to nil, enter 0
- T11 – the sum of your instalment amount (multiply T1 by T3)
- T4 Reason code for variation – reason code 23 (significant change in trading conditions)
- 5A – your PAYG instalment income amount (enter the amount from T11)
If you need to vary your PAYG instalments, speak to our registered tax or BAS agent at KPG Taxation. We are ready to help you in the process.