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Varying PAYG Installments

November 11, 2022
by: DSV
in: accounting services bookkeeping services payg personal tax sydney accountants tax accountant sydney tax agent sydney
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You can vary your PAYG installments so the amount you prepay is closer to your expected tax for the year.

If you pay PAYG instalments using the instalment amount (option 1 on your activity statement), you may want to vary if there has been a significant change in your instalment income this year.

If you calculate your PAYG instalments using the instalment rate (option 2 on your activity statement):

you do not need to vary simply because your income has changed – the payment you calculate will go up and down in line with your income;
you would usually only vary if the taxable proportion of your income has changed – for example, if your income has fallen significantly but your deductions for running costs have stayed the same.

You make your variation when you lodge your activity statement or instalment notice. You must lodge:

on or before the day your PAYG instalment is due; and
before you lodge your tax return for the year.

Your varied amount or rate will apply for the remaining instalments for the income year, or until you make another variation.

Underestimating installment amount or rate

When you vary your PAYG instalments, it is important to not underestimate your instalment amount or rate. If you underestimate, you could be left with a substantial tax bill when you lodge your tax return at the end of the year.

Also, when your tax return is lodged, the ATO compares your actual instalments to the total tax payable on your instalment income for the income year.

If your varied instalments are less than 85% of your total tax payable, you may have to pay interest (the general interest charge) on the difference, in addition to paying the shortfall. Depending on the circumstances there may also be penalties.

If you are not sure, it is best to not vary your instalments. Any overpaid instalments will be refunded to you after you lodge your tax return.

Varying your installments due to flood and other disasters

You may need to vary your PAYG instalments due to the impact of the 2022 floods or other disasters.

The ATO has said that it will not apply penalties or charge interest on variations if you have taken reasonable care to estimate your end of year tax liability. This means making a reasonable and genuine attempt to determine your liability. When considering if a genuine attempt has been made, the ATO considers what a reasonable person would have done in your circumstances.

Want to find out more?

Talk to us about whether you should vary your PAYG instalments. We can also talk to the ATO on your behalf if you are unable to pay an instalment amount.

ATO Has Resumed Collecting Aged Debts

August 23, 2022
by: DSV
in: accountant aged debt ATO bookkeeping services personal tax tax agent tax returns
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The ATO has recently announced that it will resume collecting aged debts by offsetting tax refunds or credits. Aged debts are a collective term the ATO uses to refer to its uneconomical non-pursued debts that it has placed on hold and has not undertaken any recent action to collect. These debts do not typically show up on the online accounts of the taxpayers as an outstanding balance as the ATO has made them “inactive”.

Usually when a debt is put on hold, the ATO notifies the taxpayers via a letter that the debt collection has been paused and that any credits that taxpayers are entitled to will be offset against the debt. In addition, the ATO will also note that it reserves the right to re-raise the debt in the future, depending on the circumstances of the taxpayer. Letters were sent out in May 2022 to remind taxpayers that they have aged debts and June 2022 saw the recommencement of debt collection.

While most taxpayers should have received their aged debts letter by now, some may not have received anything, due to a change of address or the patchiness of the postal service. The first clue for those taxpayers that they may have an aged debt may be when they notice that their refund is less than expected or a credit on one account is less than it should be. To avoid surprises, taxpayers who are unsure whether they have aged debt can check their online services for a transaction with the description “non-pursuit” on their statement of account.

It is important to remember that those with multiple accounts need to check all relevant accounts for that description to ensure they do not have an aged debt.

Taxpayers with aged debts who are unable or choose not to pay all or part of the debt may find that they end up paying more, as general interest charge may be automatically applied even though the debt is “on hold”. Where the ATO offsets aged debts either from ATO accounts or credits from other government agencies, taxpayers will be notified that the debt has been re-raised and offset. If it is offset against an ATO account, taxpayers will be able to find a transaction on online services with the description “offset”.

By law, the ATO is required to offset credits against any tax debts owed except in some very limited circumstances, such as having a fully compliant payment plan for outstanding debts, the tax debt is a future debt or is related to a director penalty liability, a deferral has been granted for recovery action, or the available credit is a Family Tax Benefit amount.

Taxpayers that do not meet the above criteria and are unable to pay the debt may be able to apply for a review or a debt waiver depending on their circumstances. For example, a permanent release of a debt may be available to on the basis of serious hardship (i.e. where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education).

Not sure if you have an aged debt with the ATO?

If you are unsure whether you have an aged debt with the ATO, we can help you find out. If you require assistance with debt repayment or applying for a waiver, we can assist you by working with the ATO to find the best solutions for you. Contact us today for assistance and prevent interest charges building up.

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