Understanding PAYG Instalments
If you have business or investment income, you might be asked to pay PAYG instalments. Here’s what that means in simple terms:
What are PAYG Instalments?
PAYG stands for Pay As You Go.
They're regular prepayments towards your tax bill, usually made quarterly.
This helps you avoid a large lump sum at tax time.
When Do You Start PAYG Instalments?
If your last tax return showed $1,000 or more owed (not from wages), the ATO will usually enter you into the PAYG instalment system.
This applies to sole traders, business owners, and investors.
Example: $1,000 Tax Payable
In 2024, Alex had $1,000 payable on their tax return from self-employment.
For the next financial year, the ATO notifies Alex to start PAYG instalments.
Alex will be asked to pay around $250 each quarter ($1,000 divided by 4).
How Does It Work?
You pay the set amount each quarter during the year.
At tax time, these instalments are credited against your final tax owed.
If you paid too much, you get a refund. If it’s not enough, you pay the difference.
Quick Tips
Check your ATO letters—they tell you how much and when to pay.
If your income drops, you can ask the ATO to adjust your instalments.
Always keep good records of your earnings and payments.
