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Pay As You Go (PAYG) BY, NAME – RAJEEV NEELAY

Pay As You Go (Payg) Final

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Page 1: Pay As You Go (Payg) Final

Pay As You Go (PAYG)

BY,NAME – RAJEEV NEELAY

Page 2: Pay As You Go (Payg) Final

PAYG SYSTEM OVERVIEW

PAYG is a system for regularly collecting income tax from earnings during the income year.

(Pay As You Go)

There are two limbs of PAYG:

1. PAYG Withholdings

2. PAYG Instalments

Page 3: Pay As You Go (Payg) Final

PAYG

PAYG

Withholding

PAYG

Installments

Means paying tax you withhold from

payments to others (i.e.

Salaries & Wages)

Means paying tax on your own Income (i.e.

Investment & Business Income)Regular

reporting and

remitting of tax to ATO

PAYG System

Page 4: Pay As You Go (Payg) Final

A Prepayment System

• From the payees point of view, PAYG taxes are prepayments of expected annual income tax payable.

• Payees claim any PAYG tax paid during the income year as a tax credit on their annual income tax returns for the year.

Pay As You Go (PAYG)

Page 5: Pay As You Go (Payg) Final

Some of the payments by business payers to payees subject to PAYG withholding include:

• Payments of remuneration to employees.

• Payments of directors’ fees to company directors.

• Payments to contractors under voluntary agreements.

• Payments for labour services under labour hire arrangements.

• Payments for the supply of goods or services where the payee does not quote an ABN.

• Compensation,sickness or accident payments to individuals.

Payments Covered

Page 6: Pay As You Go (Payg) Final

Employee remuneration includes:• Wages. • Salaries.• Allowances.• Bonus.• Commission.• Leave entitlement.• Eligible termination payments.

PAYMENTS OF REMUNERATION TO EMPLOYEES

Employees are generally individuals whose work tasks are

controlled by the employer paying them.

Page 7: Pay As You Go (Payg) Final

PENALTIES FOR NON-COMPLIANCE

Offence Penalty

Failure to withholdPenalty up to $1100 and liability for amount that should have been withheld.

Failure to register Penalty up to $550

Failure to remit tax by due dateGeneral interest charge for overdue period

Failure to provide payment summaries to employees

Penalty up to $2200

Failure to provide annual report Penalty up to $1100

Page 8: Pay As You Go (Payg) Final
Page 9: Pay As You Go (Payg) Final

Overview• The PAYG instalment system is another means of

regularly collecting income tax from taxpayers.

• The system applies to taxpayers with business and or investment income.

• The ATO notifies taxpayers whether they have to pay tax by PAYG instalments.

• Under the PAYG instalment system eligible taxpayers pay their own income tax to the ATO.

Page 10: Pay As You Go (Payg) Final

CONT…

• PAYG instalments are prepayments of income tax.

• The instalments are allowed as a tax credit on the taxpayer’s tax return for the income year.

• Eligible taxpayers are given various options for calculating instalment payments.

• Most taxpayers pay quarterly while others elect to pay a single annual instalment if they qualify.

Page 11: Pay As You Go (Payg) Final

ELIGIBLE TAXPAYERS

• Individuals in business.

• Individuals with investment income.

• Companies.

• Superannuation funds.

• Trustees and beneficiaries of some trusts.

Eligible taxpayers may include :-

Page 12: Pay As You Go (Payg) Final

• They have $2000 or more of gross business or investment income in their last year’s return.

• The tax assessment for their last return showed a tax debt of $500 or more.

Individual taxpayers will generally berequired to pay PAYG instalments if:

Page 13: Pay As You Go (Payg) Final

Instalment income for any tax period includes:

• Gross sales or fees received.

• Gross income from which tax was withheld because an ABN was not quoted by the taxpayer.

• Gross interest received.

• Gross rent received.

• Gross dividends received.

• Share of partnership gross income earned.

Page 14: Pay As You Go (Payg) Final

A taxpayers instalment income does not include:

• Income received that was subject to the PAYG withholding system other than where tax was withheld because an ABN was not quoted.

• Any GST amounts included in the sale price of goods or services sold.

Page 15: Pay As You Go (Payg) Final

Reporting and Paying Installments

• 28 October• 28 February• 28 April• 28 July

A quarterly BAS or IAS must be lodged at the ATO, regardless of which payment option is chosen.

Due dates for the payment of quarterlyinstalments are:

Page 16: Pay As You Go (Payg) Final

PENALTIES• Failure to notify the ATO of the correct

instalment rate for a tax period may attract a special ‘failure to notify penalty’

• This can apply to omissions or understatements of instalment income for a tax period.

• Late payment penalties apply for overdue PAYG installments.

• A General Interest Charge may also apply where instalment payers significantly underestimate their own instalment rates.

Page 17: Pay As You Go (Payg) Final

ExampleTotal Income Amount

Gross Total Income 100000$

Tax Rate (30%)

(-) PAYG Withholding

30000$

10000$

Balance Tax Liability

(-) PAYG Installments

20000$

10000$

Tax Payable 10000$

Page 18: Pay As You Go (Payg) Final