PAYG instalments: why the ATO asks you to prepay tax

What instalments are, how the rate or amount is set, and what to consider if income changes.

Pay As You Go (PAYG) instalments are prepayments towards expected income tax. They can help spread a tax liability over the year instead of leaving the full amount until after an annual return is lodged.

Your instalment may be calculated using an amount set by the ATO or a rate applied to instalment income. Check the method and figures shown on your notice before paying or varying an instalment.

If business or investment income changes, you may be able to vary an instalment. A variation that is too low can result in interest or other consequences, so use a reasonable estimate and keep the calculation behind it.

PAYG instalments are separate from GST reporting, even when they appear on the same BAS. Keep enough cash aside for both and check each label before lodging.