Change to PAYG instalments from 1 July 2016 – July 2016
The Australian Tax Office (ATO) has announced that the annual adjustment rate for Pay As You Go (PAYG) tax instalments for 2016-17 is 2 per cent.
Each year the ATO adjusts PAYG instalment amounts using a formula that takes into account the expected growth in the economy. For the 2016-17 income year, the GDP adjustment used to work out your clients’ quarterly PAYG instalment amounts will be 2 per cent.
Eligible taxpayers who report PAYG instalments or GST quarterly have the option of paying instalment amounts the ATO calculates. These amounts are printed on taxpayers’ quarterly activity statement or instalment notice.
Taxpayers can choose to vary their actual payment amounts from the ATO estimates.
The ATO calculates the instalment amounts from information taxpayers have previously reported. It adjusts these figures to take into account likely growth in your business and investment income (for PAYG) or in your GST net amount. This adjustment is based on growth in Australia's economy, as measured by GDP.
As PAYG and GST instalment amounts are intended to reflect your expected tax liabilities for the current income year as accurately as possible, the ATO adjusts the instalment amounts to reflect expected changes in the economy.
The ATO said, “If instalment amounts were solely based on your previous tax situation without any adjustment, they might not cover your actual tax liability – leaving you with an additional payment to make when you lodge your annual return.”