PAYG Instalment Variations for 2021 Financial Year

The ATO has said it will continue the lenient approach to PAYGI variations for the coming financial year. Penalties and interest for excessive variations will be waived for the 2021 financial year, however interest still applies to outstanding balances of PAYGI.

Tip – where the ATO defines either an instalment amount (option 1) or an instalment rate (option 2), consider changing your software settings and using the income % rate, in consultation with the business owner. The ATO allows taxpayers to swap to option 2 in the first quarter of a financial year if they were previously using option 1.

This way you are compliant with ATO instalment calculations without having to request a variation from a tax agent. It also calculates a more realistic amount for this tax year, where the default instalment amount may be higher than is warranted for this year’s business turnover.

If you want to vary either the default amount or rate of instalment, then you must seek direction from the business tax agent before entering a variation on a BAS. They may require forecasted figures for the remainder of 2021 financial year.

Note that the Budget 2020-21 has impacts on PAYG instalments for companies. Your clients’ tax agent should review the relevant offsets available and advise you if they wish you to vary the PAYG instalments because of budget impacts.

ATO PAYG instalments