Monthly tax tip:
PAYG tax instalments are instalments towards an individual’s income tax. If an individual (including sole traders, partners in partnerships and beneficiaries of a trust) has an amount payable of $1,000 or more on their tax return, then the ATO will commence PAYG tax instalments (usually payable on a quarterly basis) so that their tax is paid or mostly paid before their next tax return is due. If a taxpayer pays too much in instalments, then they will receive a refund, and if they pay too little, they will need to pay the difference. PAYG instalment notices will usually allow a variation of income tax if the estimate doesn’t fit the taxpayers income. This is calculated by the taxpayer as an estimate to reduce or increase the calculated instalment. However, if the taxpayer chooses to reduce their instalments and the total that they paid is less than 85% of their total tax payable, then they may have to pay a general interest charge on the difference as well as the shortfall interest.
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