How we calculate your instalment amount
We calculate your PAYG instalment amount using information from your most recent tax return.
We adjust this amount to reflect any likely growth in your income. The adjustment is based on changes in Australia’s gross domestic product (GDP).
Your PAYG instalment amount is intended to reflect your expected tax liability for the year. If you vary your instalment amount or lodge a tax return, the instalment amount on your next activity statement will change, because it will be based on this new information.
How we calculate the GDP adjustment
We update the GDP adjustment factor at the start of each income year using data from the Australian Bureau of Statistics or a percentage set by law. The adjustment is based on GDP changes over the previous 2 calendar years.
The GDP adjustment for the 2024–25 income year is 6%.
If your instalment amount was solely based on your previous tax situation, with no adjustment, it might not cover your actual tax liability. This means you might have to pay extra tax when you lodge your tax return.
The GDP adjustment factor:
- applies to PAYG instalments for the 2024–25 income year for taxpayers whose quarter starts on or after 1 April 2024
- is used to calculate your PAYG instalments if you pay quarterly (or twice yearly) using the instalment amount
- does not affect you if you work out your own instalments (using the rate method) or pay annually.
How we calculate your instalment rate
We calculate your PAYG instalment rate using information from your most recently lodged tax return.
The instalment rate calculation is:
(Estimated (notional) tax ÷ instalment income) × 100.
Reasonable instalment rates
If the calculated rate is more than the highest income tax rate for your entity type, we will automatically reduce it to a more reasonable rate (see Reasonable instalment rates table). The adjusted rate will appear on your activity statement.
Your instalment rate may be high before our adjustment if:
- you received income from an employee share scheme
- you reported a Higher Education Contribution Scheme (HECS) or Higher Education Loan Program (HELP) debt in your last tax return
- you reported income at the wrong label in your last tax return
- your return is amended to include excess superannuation contributions.
Carried-forward losses for companies
If you are a company and carry forward a tax loss in your most recent tax return, we will adjust your taxable income (for the purpose of calculating your instalment rate) by excluding the lesser of the:
- tax loss deducted in the return
- amount of any tax loss carried forward to the next income year.
If the carried-forward loss is more than the tax loss deducted
We will use the loss you claimed when we work out the adjusted taxable income from which we calculate your instalment rate.
Example: remaining carried forward loss is more than the tax loss deducted
AJ Pty Ltd has assessable income of $100,000, deductions of $30,000 and a carried-forward loss of $10,000. AJ has chosen to deduct $4,000 of the loss in its current tax return and carry forward the balance of $6,000 to the next year ($10,000 minus $4,000).
The company's tax loss deduction in the current tax return ($4,000) is less than the carried-forward tax loss ($6,000).
Therefore, its adjusted taxable income (which is used to calculate AJ's PAYG instalment rate) is:
|
Assessable income |
$100,000 |
|
minus deductions |
$30,000 |
|
minus amount of deduction for tax loss |
$4,000 |
|
Equals taxable income (adjusted) |
$66,000 |
If the carried-forward loss is less than the tax loss deducted
If the loss you carried forward to the next income year is less than the loss deducted in your most recent tax return, we will use the carried forward loss amount when we work out the adjusted taxable income from which we calculate your instalment rate.
Example: remaining carried forward loss is less than the loss deducted
AJ Pty Ltd has assessable income of $100,000, deductions of $30,000, and a carried forward loss of $10,000. AJ claims $7,000 of this loss as a deduction in its current tax return.
The amount of the tax loss to be carried forward ($3,000) is less than the loss deducted in this tax return ($7,000).
Therefore, the adjusted taxable income used to calculate AJ's PAYG instalment rate) is:
|
Assessable income |
$100,000 |
|
minus deductions |
$30,000 |
|
minus amount of tax loss carried forward to the next year |
$3,000 |
|
Equals taxable income (adjusted) |
$67,000 |
End of example