85% rule applies to PAYG instalment variations

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(Newbie)Newbie

23 Feb 2025

I would like to clarify how the 85% rule applies to PAYG instalment variations and potential General Interest Charges (GIC).

My Situation:

Annual salary: $140,000 (PAYG withholding by my employer: ~$33,138)
Interest income for the year: $3,660
ATO PAYG instalment issued: $577 per quarter (based on last year’s notional tax: $2,178.25)
I'm Considering varying PAYG instalment to $0

I understand that if my varied PAYG instalments are less than 85% of the total tax payable, I may have to pay a GIC on the shortfall, as mentioned here: How to vary your PAYG instalments | Australian Taxation Office [link replaced by moderator]

I'm a bit confused about this rule.

If my total tax payable for the year is ~$34,492 (for salary + interest + medicare), and my employer already withholds ~$33,138 (which is more than 85% of my total tax payable), does this mean I will not have to pay a GIC for varying my PAYG to $0?

Would appreciate any clarification from the ATO. Thanks!

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