Common causes of unexpected high PAYG instalments

Under the PAYG instalment system, taxpayers pay instalments based on their expected income tax liability on their business or investment income prior to the lodgment of their tax returns.

A taxpayer’s instalment rate or amount is calculated by the Tax Office based on the most recently lodged income tax return.

Common causes for high instalment rate or amount include:

• The taxpayer received employee share scheme income;
• The taxpayer reported HECS/HELP debt in their last income tax return;
• Income was disclosed at a wrong label in the income tax return;
• The return is amended to include excess superannuation contributions

PAYG instalments can be varied if:

• The taxpayer, or their tax agent, believes the instalment rate or amount is too high; or
• The taxpayer’s financial circumstances have changed

Caution must be taken when varying instalments. If the varied amount or rate turns out to be less than 85% of what it should be, taxpayers may be liable to pay a variation penalty.

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Penalty imposed on company directors for unpaid superannuation guarantee

Company directors may be made personally liable for a penalty equal to their company’s unpaid superannuation guarantee (SG) charge amounts in certain circumstances.

The Tax Office has the ability to estimate a company’s SG charge liability if the company does not pay the SG charge by the day on which the super guarantee statement for the quarter is required to be lodged.

To avoid the penalty, SG payments must be made to the employees’ superannuation funds by the following cut-off dates for the:

• 1 July – 30 September Quarter: 28th October
• 1 October – 31 December Quarter: 28th January
• 1 January – 31 March Quarter:  28th April
• 1 April – 30 June Quarter:   28th July

If the company lodged the quarterly SG statement within three months of the due date but the superannuation liability remained unpaid, the director penalty may be remitted if the company pays the SG charge, or the company is being wound up or put in administration.

If the SG statement remains unlodged for more than 3 months after the due date and the SG charge is still outstanding, the director penalty can only be remitted when the company pays the outstanding SG charge. Putting the company in administration or liquidation will not remove the director’s personal liability.

For more information, click here.