Last October I carefully estimated my income and tax payable for FY 2026, and made a variation of my PAYG instalments for FY 2026.
After lodging my tax return for FY 2025, ATO has advised it will increase my PAYG instalments.
Why does ATO ignore my variation lodged last October ?
Why should I need to lodge another PAYG variation when it has already been done correctly ?
We might speculate the reasons why ATO creates unnecessary rework.
The ATO basis your PAYG Instalments on the latest tax return lodged. If the variation was done prior to lodgement of tax return, then ATO will increase/decrease to an amount based on your tax return.
To vary your next PAYG Instalment, it must be lodged prior to lodgement date of the IAS.
I'm annoyed that I'm required to do this variation twice.
I carefully varied my instalments for FY 2026 in September quarter.
Should not be necessary to do this over again. Rework should not be required.
Hi @Colin_Oscopy,
Your earlier PAYG instalment variation hasn’t been ignored, but it doesn’t permanently override how instalments are calculated.
PAYG instalments are reviewed and re‑set after your most recent tax return is lodged. When your 2024–25 return was processed, we recalculated your instalment rate or amount based on any likely growth in your income. The adjustment is based on changes in Australia’s gross domestic product (GDP). That recalculation applies automatically, even if you lodged a variation earlier in the year based on estimates.
A variation applies to the financial year it’s lodged for. Once a new assessment issues, we’re required to base instalments on that updated assessed position to keep them aligned with your most recent tax outcome.
If the revised instalment amount doesn’t reflect your expected income for 2025–26, you can lodge another variation to adjust it.
Thanks for your reply.
Sadly, I do understand how the ATO system works.
My point is that the ATO process is not simple and efficient.
I should be able to do this variation for FY 2026 a single time, without needing to do any rework.
Perhaps you might share this suggestion for system improvement with your higher-ups.
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