PAYG Instalment Variations and Refunds to Assist Cash Flow
PAYG Instalment Variations and Refunds to Assist Cash Flow
PAYG instalments are payments made towards an expected future income tax bill on a quarterly basis. Once the tax return has been completed for a year, the tax liability is calculated and any instalments paid during that year are credited towards the tax bill. The business then either receives a refund or pays the balance owning. PAYG instalments are designed to make the tax bill easier by paying in advance.
The ATO is allowing businesses that usually pay instalments to vary the amount to nil on the March and June 2020 activity statements to assist with cash flow during the Coronavirus crisis.
Whilst instalments can be varied to a lower amount or to nil, (without incurring the usual penalties for incorrectly varied instalments), it is important to remember that income tax may still be payable once your tax return has been completed.
Whilst your business may have dramatically reduced turnover, if the business makes any profit or if sole traders earn above the taxable threshold, income tax will be payable. There will of course be the option to enter into an ATO payment plan for income tax debt if needed.
Instalments already paid against the September 2019 and December 2019 activity statements can also be refunded by the ATO. This may be useful to assist cash flow, but for some businesses it will make more sense to leave instalments paid with the ATO, and to consider varying March and June instalments.
Talk to us about whether varying your PAYG instalments downwards will help your business to stay afloat. We can also apply for PAYGI refunds on your behalf if that is applicable for your business.
