Understanding PAYG Instalments.

If you're running a business or earning investment income, you’ve likely come across the term PAYG instalments — but many people still aren’t clear on what they are, how they work, or why they're important.


In this article, we break down PAYG instalments and explain what you need to know to stay on top of your tax obligations, avoid penalties, and manage your cash flow with confidence.

 

What are PAYG instalments?

PAYG (Pay As You Go) instalments are regular pre-payments of your tax, made throughout the financial year. They’re designed to help individuals and businesses avoid a big tax bill at the end of the year, by splitting the bill into smaller payments throughout the year.


The system applies if you earn income that hasn’t had tax withheld — for example:

  • Business income (as a sole trader, company, or trust).
  • Investment income (such as rent, dividends, or interest).

Instead of paying your full tax bill at tax time, you pay portions in advance, based on the income you earned last year.

 

How do you know if you’re in the PAYG system?

“How did I get here!?”. This is a question a lot of people have.


You’re automatically enrolled into the system based on your tax return. The ATO will notify you if you’ve entered the PAYG instalment system. This typically happens after you lodge your tax return, and the ATO determines that your income meets the threshold for PAYG.

 

The ATO automatically adds people to the PAYG system if:

  • Your business or investment income is over $4,000 (individuals).
  • You had at least $1,000 in tax payable on your last return.
  • You're not already paying enough tax via PAYG withholding (like employee wages).

If you’re unsure, check your myGov account, or speak with us — we can check your ATO account and confirm your PAYG status.

 

How are PAYG instalments calculated?

Your instalment amount is based on your last lodged tax return. The ATO uses your reported income to estimate your likely tax bill and then splits it into quarterly payments. For example, if your 2023 return showed $60,000 in business income, the ATO will estimate your 2024 tax and issue PAYG instalments based on that.


This is helpful — but not always perfect. If your income is higher or lower this year, you may want to vary the instalment amount.

 

If you’re going to vary your instalment, do it early.

If your income has changed — up or down — you can vary your PAYG instalment to better match your current situation. But there’s a catch… You must lodge the variation before the due date of the instalment.


For example, if your next instalment is due 28 April, you must submit the variation before that date. Once the deadline passes, the amount is locked in — even if your actual income is lower than expected.


Also, varying too low without reasonable basis may result in interest charges or penalties, so always check with your Accountant before adjusting.

 

When are PAYG instalments due?

If you’re in the PAYG instalment system, you usually need to pay quarterly on the 28th of July, October, January, and April. So, four times a year, by or on the 28th of those months. It’s essential to make your payment on time — missing a deadline can result in interest charges or penalties from the ATO.

 

Where to find your PAYG instalment notice.

The ATO won’t always send you a letter in the mail. If you’re an individual or sole trader, your PAYG instalment notices will appear in your myGov account, under your linked ATO services. You must check your myGov inbox each quarter. If you don’t, you could easily miss a payment date — and that can cost you.

If you run a business and use a tax agent or BAS agent, the notice can also be accessed through your business portal or agent’s portal. However, you must check your myGov account and business portal.

 

Opting out of PAYG instalments (spoiler alert: you can’t).

Many clients ask us whether they can opt out of PAYG instalments. The short answer is: no — you can’t simply opt out for convenience.

However, in certain cases, you can request to be removed from the PAYG instalment system entirely. This usually applies if your business or investment income has dropped below the ATO’s threshold and is not expected to return to that level. You or your Accountant can make this request to the ATO, and if they accept it, you may be taken out of the system. Alternatively, if your next tax return shows income below the threshold, the ATO may automatically remove you.

 

The bottom line.

PAYG instalments help smooth out your tax payments across the year — but they only work if you stay on top of the due dates, check your myGov notifications, and update your payment amounts if your income changes.

We help business owners and investors across Perth manage their PAYG obligations with confidence and clarity. Whether you’re new to the system or want help varying an instalment, we’re ready. Get in touch with Ascent today.

Need help with your accounting?

Find Out What We Do

June 30 Checklist for Business Owners

June 12, 2025
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.

Our EOFY Guide for Taxpayers.

June 12, 2025
EOFY is almost here. Are you ready? Now’s the time to get your finances in order and maximise your tax return. Our latest guide covers top tax deductions, super contributions & co-contributions, SMSF must-dos, PAYG instalment tips and a 30 June checklist.

Maximise Your Rental Property Tax Deductions this EOFY

June 12, 2025
Whether you're a first-time landlord or managing multiple properties, understanding what you can claim at tax time can make a big difference to your bottom line. In our latest blog, we break down the most common (and often overlooked) deductions.

What is a Bridging Loan? And When Would You Need One?

May 12, 2025
Buying and selling property rarely lines up perfectly. The logistics of it all can be incredibly stressful. If you’ve found the perfect next home but haven’t sold your current one yet, a bridging loan can make your move easier, without having to wait on your current property sale.  What is a bridging loan? A bridging loan is a short-term loan that gives you the funds to buy a new property before your current property has sold. It’s designed to bridge the gap between buying and selling. These loans are generally interest-only and are typically offered for up to 12 months, giving you time to sell and settle on your current home while already owning the next one. When would I need a bridging loan? You might consider bridging finance if: You’ve found your next home but haven’t yet sold your current one. You want to avoid renting or moving twice between sales. You want more time to prepare your home for market to get the best sale price. You're building a new home while still living in your existing one. How does it work? Peak Debt: The lender combines your current mortgage, the cost of the new property (including stamp duty and legal fees), and any interest (if it’s being capitalised). This total is known as your Peak Debt. Interest Only: During the bridging period, you’ll typically pay interest only — or the interest may be capitalised (meaning it’s added to your loan rather than paid upfront). Sell Your Property: Once you sell your existing home, the sale proceeds are used to reduce your Peak Debt. End Debt: The remaining balance becomes your End Debt, which then continues as a standard mortgage. An example of a bridging loan. Your current home loan = $200,000 New home = $800,000 Total bridging loan (Peak Debt) = $1,000,000 After selling your home for $600,000, that amount is used to pay down your loan Remaining loan (End Debt) = $400,000 Things to consider. Like any major financial decision, it’s important to understand all the moving parts before you commit. Time pressure: You typically have 6–12 months to sell. If you don’t sell in time, the lender may step in to sell the property and/or charge default interest. This is an extra interest rate that a lender charges when you fail to meet your loan obligations — in this case, not selling your property within the agreed timeframe. Interest costs: If interest is capitalised, it means you're not making repayments during the loan period, so the interest gets added to the loan balance instead of being paid separately. This means your loan grows each month. Making even small repayments can help keep this under control. Equity & serviceability: Lenders will assess how much equity you have and whether you can manage the loan during the bridging period. Loan-to-value ratio: If your End Debt ends up being more than 80% of the new property’s value, you may have to pay Lenders Mortgage Insurance (LMI). Existing loan setup: If your current lender doesn’t offer bridging loans, refinancing may be required — sometimes triggering break fees if your existing loan is fixed. This means you may have to pay a penalty if you end a fixed-rate home loan early (before the agreed term is up). Is a bridging loan right for you? That’s the big question. Bridging finance can offer flexibility and peace of mind, helping you move forward with confidence rather than being held back by uncertain sale timing. But it’s not without risk or cost — so it’s vital to understand the structure, timeframe, and repayment expectations. If you’re considering your next property move and want tailored advice on whether bridging finance suits your situation, talk to the team at Ascent Property Co. or Ascent Accountants. We can also put you in touch with finance brokers to discuss what is best for you.

The true cost of work perks.

May 12, 2025
That work perk might be costing you more than you think… Fringe Benefits Tax (FBT) is charged at a whopping 47% — the same as the top personal tax rate. That means lower salary or fewer benefits. So, while salary packaging can save tax, in many cases it ends up costing you more.

Act Fast to Reduce Your Tax Bill!

May 12, 2025
If you’re expecting a higher income this financial year, now is the time to act. We’ve put together 9 Smart Tax Planning Tips that could save you thousands — but they only work before 30 June.
More Posts