Author: EdenATO(Community Support)Community Support 24 Nov 2023
Hello there @Dirkathon,
The reason why is a little tricky to explain but I'll do my best!
First off, we have a great article for answers to your PAYG instalment questions on our website. Definitely worth a look.
The easiest way to put it is we counted the instalments in your tax return anyway. This is how the math for instalments work.
So, say you have quarterly instalments for $1000 per quarter. You don't change them but, you also don't pay them. By the time you lodge your tax, you have $4,000 owing on the account.
When we get your return, we add that $4,000 as tax paid. This means when we do the math, we are adding your instalment total to your PAYG withholding. Totally normal!
If you paid your instalments that's fine. The return goes through, and you get any refunds that are worked out.
What has happened here is the refund amount on your notice of assessment is not right. We've counted an amount you didn't pay. So, we get that back before sending out any leftovers.
You should be able to see where we counted these amounts on your notice of assessment. There will be a label that says something like tax withheld and other instalments. Here you will see what your employer withheld AND the instalments.
Because you didn't need the instalments, you might get an exit letter from us. This will tell you they have been turned off. But if you are still on them and don't expect any extra tax again this year, you might want to vary them. This changes what is expected for the year. They can be changed to 0 if needed.
You can find out how to vary your PAYG instalments on our website.
Thanks for the reply EdenATO.
I understand some of your points but
"Because you didn't need the instalments, you might get an exit letter from us"
Exactly, I did not need the instalments because additional income was not generated. The $4000 tax paid is based on non existent income.
Question: If I varied the instalments to $0 at the beginning of 21-22 tax year, knowing I would not earn additional income would I be $4000 better off?
Thanks
Author: DanielleATO(Community Support)Community Support 28 Nov 2023
Hi @Dirkathon,
Yeah, it seems that this has caused some confusion. When it comes to PAYG instalments they lodge themselves. If you do not make the payments, when the tax return processes the instalments are included as a credit to your tax return.
If the amounts from your income tax account transfer to the ICA. This is the system reconciling the amount that you did not pay.
If you vary the amount on the first quarter of the financial year, for example 01/07/21 - 30/09/21. Then there would be no amount payable on the ICA. You wouldn't be better off; it just means the PAYG instalment credit would not have been applied to your tax return.
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