For clients who aren’t immersed in business, sometimes the names of the taxes they pay can be confusing. Especially when so many of them start with PAYG, and when wage and salary earners may have only met personal PAYG Income Tax. So, here’s a little intro to all the PAYGs.
This is the PAYG that all employees know. The employer holds back (withholds) an estimate of the amount of tax payable from their wage or salary. That estimate is based on tables issued by the ATO.
Businesses of all types also have to withhold estimates of tax payable from a range of other payments they make. These include payments to:
Some clients are unfamiliar with PAYG Instalments until the ATO demands they pay them. The ATO asks for PAYG Instalments when a business makes a profit or gets investment income in the previous year, or when individuals get investment income.
The ATO estimates what the likely profit or investment income will be based on the previous year, and asks you to prepay a fraction of that estimate every quarter.
You can vary the instalment if you know the coming year’s profit or investment income is going to be different. There can be negative consequences (an interest charge or even a fine) if you get the variation wrong. So we strongly recommend you contact us before you do anything. Go here for more information on varying your instalments.
For payments related to investments and some overseas transactions, the business or entity making the payment has to withhold tax. The general idea here is that the payment may be hard to track or tax difficult to recover, so it has to be withheld.
At Inline Partners we want to make it simple, and give you the tools to understand tax matters. If you need help making sense of your tax, please book a free consultation with us.