In light of the ongoing impacts of COVID-19, the ATO has announced that it will not apply penalties or interest for excessive PAYG variations in the 2020–21 financial year, continuing its approach for the previous income year.
“We will not apply penalties or interest for excessive variations if your clients have made their best attempt, but general interest charges may apply to outstanding PAYG instalment balances,” the ATO said.
Chartered Accountants Australia and New Zealand tax leader Michael Croker said that while it was generally rare to vary the September quarter PAYG instalment, current trading conditions may necessitate an early variation.
“The ATO has certainly come to the table and recognised that many are struggling in these hard economic times,” Mr Croker said.
“As we all know, cash flow is key, and while paying in instalments makes sense for a ‘normal’ tax year with better economic conditions, given the reduction in revenue, a PAYG instalment check-up may be a good idea right now.
“ATO penalties can apply for large, inaccurate PAYG instalment variations, so taxpayers usually wait till a later quarter when they have a better idea of how their income is tracking.
“But COVID-19 has changed all that: many businesses can already see a rocky road ahead and are really worried about cash flow, and to their credit, the ATO has recognised that.”
Mr Croker also urged business owners not to leave PAYG instalment variation discussions to the last minute and to seek out early advice from accountants who are best placed to understand their current situation.
“For the September 2020 instalment, your accountant may also suggest changing the method by which PAYG instalments are calculated so that your payments are more closely aligned to cash flow,” he said.
“A 2020–21 forecast budget may be needed, and your accountant will want to understand the impact of any recent or planned changes in your business or investment strategy.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.