What do You Need to Know about PAYG Instalments?

When it comes to different types of taxes that every business owner must know, then many business owners consider Pay As You Go (PAYG) tax instalments self-explanatory. However, there are some important points that you need to consider as a business owner, especially if you are new to the system. If you are a startup business owner, then it might seem difficult for you to manage PAYG tax instalments, but you don’t need to worry about them if you have a reliable tax accountant. If you don’t have one yet, then you can look for a professional tax agent Melbourne.

The ATO has different methods that taxpayers use to pay their annual taxes. Generally, the PAYG scheme was introduced to create tax instalments on regular basis for individuals that meet specific criteria. As a result, it can be considered controlled and manageable tax payments. To know more about PAYG instalments, keep reading this blog:

What are Pay As You Go (PAYG) Instalments?

PAYG instalments are referred to as payments that you make on taxes for business and investment income. In simple words, if you are running a business or investing and making above the annual income threshold, then you need to opt for PAYG instalments. To keep a healthy cash flow, it is important to plan ahead for the end of the financial year. In this situation, PAYG instalments can help you. You can also ask a tax agent about PAYG instalments if you are unaware of them. For this, you can also search for ‘tax agent near me’ to find a tax agent near your location to lodge your tax returns.

How do PAYG Instalments Work?

Generally, you need to pay PAYG instalments once every 3 months. The amount that you need to pay will be based on your investment and business income. As a result, you can avoid large tax bills after you file your income tax return. If you pay PAYG instalments even then, you have to file an annual income tax return. You can plan ahead, manage your cash flow, and budget for tax costs.

Usually, PAYG instalments are made during the year to evaluate and check whether the company owes more tax or is due for a tax refund. The sum of tax liability is calculated when the yearly income tax return is determined at the end of the financial year. The ATO will notify companies and people who have to pay PAYG instalments. If you have an experienced tax agent, then they can keep you updated regarding this. However, if you haven’t hired one, then you can search for the best tax agent Melbourne.

PAYG Withholding vs. PAYG Instalments

Basically, there are two kinds of PAYG tax payment methods – PAYG withholding and PAYG Instalments. You need to understand the basic difference between PAYG instalments and PAYG withholding for tax purposes.

• PAYG Instalments or PAYG – I: in this type of tax payment, an employer is responsible for withholding an employee’s tax and pays the tax on the behalf of the contractor or employee to the Australian Tax Office.

• PAYG Withholding or PAYG – W: in this type of tax payment, a business owner or sole trader makes payments once every 3 months to the ATO and this payment will be based on their investment or business income.

You can also search for an online tax agent Melbourne to get details about tax returns, PAYG instalments, PAYG withholding, etc. You can also take help from them to know how you can pay PAYG instalments.

How to PAYG Instalments?

There are two methods that you can use to pay the PAYG instalments:

• Automatic Entry

If you surpass an income threshold, then you will be automatically liable to PAYG instalments. The ATO will notify you that you have been enrolled in PAYG. They will also notify you about how much you have to pay and the date when you have to file your tax returns.

• Voluntary Entry

You will be liable to voluntary entry when you sign up for PAYG before you get enrolled for the PAYG by the ATO automatically. The individual can plan and enroll in the PAYG instalments before they meet the ATO thresholds. Voluntary entry is relevant for firms or sole traders who got a huge profit or are new to the business.

Before you pay any type of tax, it is important to have an accurate financial transaction record, and the Melbourne bookkeeper can better do it for you. These records are used by tax accountants to prepare and lodge a tax return.

Conclusion

The blog is all about PAYG instalments and now, you may have an idea about what exactly PAYG instalments are and how they can benefit you. Moreover, for more details, you can also contact Reliable Melbourne Accountants.