The Australian Taxation Office has updated its guidance on pay-as-you-go instalments, reassuring businesses that they can vary their PAYG throughout the year if they think they will pay too much, compared with their estimated tax for the year.
To assist businesses affected by COVID-19, the ATO said it will suspend penalties or interest for the 2020–21 income year for excessive variations when businesses make their best attempt to estimate their end-of-year tax.
However, general interest charges may apply to outstanding PAYG instalment balances.
“Variations don’t carry over into the new income year, so if you made variations in the 2019–20 income year, you may need to vary again in 2020–21,” the ATO reminded.
“Your varied amount or rate will apply for all your remaining instalments for the income year, or until you make another variation.”
The ATO encouraged businesses to review their tax position regularly and vary their PAYG instalments as their situation changes.
The announcement comes after the government announced in June it would legislate to suspend the indexation of tax instalment amounts for the 2020–21 financial year in response to COVID-19.
It is estimated that the change will affect instalments payable to the ATO for an estimated 2.2 million taxpayers paying PAYG income tax instalments, and around 81,000 taxpayers paying goods and services tax instalments in 2020–21.
For more information on varying your pay-as-you-go instalments, click here.