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Whether voluntary or mandatory, the Tax Office has warned agents to ensure their client understands their obligations.
Accountants must educate clients on PAYG instalments: ATO
22 February 2023
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7 minute read
Accountants must educate their clients on PAYG instalments, the ATO says, or many will be caught out by paying too little through the variable system.
The ATO is calling on accountants and tax agents to help clients calculate PAYG instalments to ensure they maintain a healthy cash flow and to remind them that payments can begin once they receive a BAS or instalment notice.
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Individuals or trusts – including sole traders – would be automatically entered into the PAYG system if they had instalment income from their latest tax return of $4,000 or more, tax payable on their latest notice of assessment of $1,000 or more and a notional tax of $500 or more.
A company or super fund client would be automatically entered into the system if it had instalment income from its latest tax return of $2 million or more, a notional tax of $500 or more or was the head company of a consolidated group.
The ATO said accountants should help clients who used PAYG instalments to vary payments to ensure they did not pay too little tax for the year. This could be organised through the next activity statement once it was available through the practitioner lodgement service software or on the online services for agents.
The Tax Office warned accountants that if their clients’ varied PAYG instalments were less than 85 per cent of their total tax payable they might be liable to pay a general interest charge on the difference as well as paying the shortfall.
For businesses or individuals impacted by disasters such as the floods in 2022, the ATO said it would not apply penalties or charge interest on variations if they had taken reasonable care in their estimate.
The different variation reasons and their codes provided by the ATO included:
- Change in investments - 21
- Current business structure not continuing - 22
- A significant change in trading conditions - 23
- Internal business restructure - 24
- Change in legislation or product mix - 25
- Financial market changes - 26
- Use of income tax losses - 27
- Consolidations - 33
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