ATO Warning: Keep PAYG Variations Within 15%

The ATO has reminded businesses and individuals to be careful when changing (or “varying”) PAYG instalments. The key rule: don’t reduce your instalments by more than 15% of your expected tax—otherwise you could face interest or penalties.

Why 85% Matters

Paying at least 85% of your final tax liability during the year means you generally avoid interest and late-payment penalties. Falling below this threshold can trigger extra costs.

The Risks of Underpaying

1. Interest Charges (GIC): If your instalments are too low, the ATO will charge interest on what’s unpaid.

2. Penalties: Big downward variations can also attract penalties, not just interest.

   
   

Best Practices for Safely Varying PAYG Instalments

• Stay Within 85%: Make sure your instalments cover at least 85% of your expected tax. If you use a set instalment amount, vary carefully. Instalment rates are safer as they adjust with income, but you still need to keep an eye on changes.

• Make Informed Estimates: Base any variation on solid projections of your income and deductions.

• Keep Records & Seek Advice: Document why you made changes, and talk to your Client Manager if unsure.

• Know When Interest Might Be Waived: The ATO may not charge interest if your variation was a reasonable attempt to estimate tax, especially during disasters or unusual situations.

The bottom line: keep variations within ±15% of your expected tax liability to avoid extra costs. It’s more than just a guideline—this is ATO policy.

If you have questions about your PAYG instalments, contact your Client Manager for guidance.