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Annual PAYG installment still needed if tax return lodged

Newbie

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Replies 2

I am currently a sole trader and I have opted for annual PAYG installments. This was approved by the ATO. I do not employ anyone; do not need to register for GST; and my main source of income is through PSI.

 

I have a full time job, and my income from my sole trading business will be reported on my annual tax return.

In theory I could put in my tax return now, but I am wondering if I will still need to make a PAYG installment after I get my tax bill.

 

For example, suppose I do my tax return for the 2019-20 financial year in July 2020. I find out that I need to pay $1000 tax. I pay this in July 2020.

Then I receive a notification for my annual PAYG installment. Suppose it is $2000 (due to being based on estimated turnover rather than actual turnover). I would need to pay this by October 2020.

But I would have already paid tax on my sole trader income, so I presume this PAYG installment would essentially be held onto until next year.

 

As an alternative example or arranging the transactions, suppose I wait until I get my notice for the annual PAYG installment, and it is $2000. I pay this amount by October 2020. Then after the PAYG installment is processed, I lodge my tax return for the 2019-20 financial year. As before I find out I only needed to pay $1000 in tax, so I would get a refund of $1000.

 

Is this correct, or have I missed something?

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 1

Hi @NumberNerd 

 

You should still pay your PAYGI amount by October 21 because PAYGI amounts are still applied as a credit after your tax return has been lodged regardless if payment is received or not. A debt will be raised on your activity statement account for the PAYGI which is a separate account to your tax return account.

 

For example, if your PAYGI amount is $1000.00 this will be applied to your tax return as a credit so the outcome of your tax return will have already considered the PAYGI amount. 

 

If you intend to vary the PAYGI amount then you need to do so before you lodge your tax return.

 

Hope this helps.

 

Thanks, Ari

2 REPLIES 2

Most helpful response

ATO Community Support

Replies 1

Hi @NumberNerd 

 

You should still pay your PAYGI amount by October 21 because PAYGI amounts are still applied as a credit after your tax return has been lodged regardless if payment is received or not. A debt will be raised on your activity statement account for the PAYGI which is a separate account to your tax return account.

 

For example, if your PAYGI amount is $1000.00 this will be applied to your tax return as a credit so the outcome of your tax return will have already considered the PAYGI amount. 

 

If you intend to vary the PAYGI amount then you need to do so before you lodge your tax return.

 

Hope this helps.

 

Thanks, Ari

Newbie

Replies 0

Thanks for your response. So, if I understand you correctly, the cash flow will be different under my scenario of lodging prior to getting an installment notice - I would get a refund of 1000 and then need the pay the 2000 PAYGI in October. But I think I would still need to wait for the notice anyway, so I know how much PAYGI credit to put into the tax return.