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Pay As You Go (PAYG) Tax – You may be able to vary the amount you need to pay
VARYING THE PAYG WITHHELD FROM YOUR WAGES AND ALLOWANCES
The main purpose in making this variation is to ensure that the amounts withheld from your salary and wages best meet your expected income tax liability at the end of the year. If you usually receive income tax refunds due to larger than normal tax deductions, you can elect for your employer to withhold less PAYG tax from your salary and wages, including any allowances, than they are otherwise required to withhold.
Examples of when you may elect to have less PAYG tax withheld from your salary and wages Include;
- If you have negatively geared investments such as real estate, managed funds or shares etc.
- If you receive an allowance from your employer that you also claim work related deductions for such as car, phone, parking or travel expenses, you can vary the amount of tax withheld from the allowance.
- If you meet the criteria to apply losses incurred in running a business as an individual, either as a sole trader or in partnership, against your salary and wage income.
- You have paid out your HELP debt but your employer continues to withhold amounts for this debt.
You can access an electronic version of the ‘PAYG withholding variation application’ via the ATO’s website – www.ato.gov.au. Alternatively a paper copy can be downloaded from their website or sent to you in the post.
VARYING PAYG INSTALLMENTS
The PAYG instalment amount or rate that the ATO advises you of is calculated based on your business and investment income tax from your last assessed income tax return. This amount can be varied if you believe your situation has changed and paying the advised amount would result in you paying significantly more than your expected tax payable on your business and investment income for the current year.
Examples of changes that may give you reason to vary your PAYG instalment amount include;
- A significant decrease in your share portfolio.
- A significant reduction in income from an investment property for example due to selling a property, receiving less rental income, or higher than expected tax deductions for the same amount of rent e.g. increased costs associated with maintaining the property.
- You cease to earn income from business or investment activities.
- Your Higher Education Loan Programme (HELP) debt has been paid out.
Varying your PAYG instalments is done by filling in boxes T8, T9 and T4 on your activity statement and reason codes can be found on the ATO’s website.
If you would like more information on whether varying your PAYG tax is appropriate for you, please contact Andrew Rumsey on (03) 9832 8407 or Jennie Grover on (03) 9832 8406.