Do you need to adjust tax instalments?

PAYG instalments are used by the Australian Taxation Office to collect amounts towards your expected income tax liability on your business and investment income during the income year.

Business income can also include your share of profits from a partnership or a trust.

Your tax liability is worked out at the end of the income year, when your annual income tax return is prepared and your PAYG instalments are credited against your income tax assessment to work out if you owe more tax or are owed a refund of some of the tax you have already paid.

Because the required instalments calculated by the ATO are based on the most recent income tax return you have lodged, the amount may be inappropriate if your circumstances or trading conditions have changed significantly in the new financial year.

For this reason, you are able to vary the instalment to a more appropriate amount.

It is important to note this should be done with some caution.

When varying instalments, you may be liable to pay a general interest charge back to the date the instalment should have been paid, if your varied amount is less than 85% of the actual tax payable on your business and investment income when your tax return is prepared.

Undertaking tax planning can assist with avoiding general interest charges from varying your instalments too low.

Tax planning involves reviewing the year-to-date financial performance of your business and aims to predict what profit levels, come June 30, might look like.

This not only gives you a better idea of what your final tax position might look like but can give you peace of mind that varying your instalments won't come back to bite you.

We strongly recommend you contact your financial advisor or our office for assistance before varying your instalment amount.

 

 

 Jody Williams B Bus (Accounting), CPA is client manager at GTC Financial, Gladstone.

Topics:  farm finance, tax, tax advice



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