Why the ATO asks for PAYG instalments after you pay your tax bill

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Sherry | Senior Accountant

08 September 2026

Overview

A PAYG notice can land just as you’ve finished paying last year’s tax. Check which income year it covers and whether the amount still makes sense for what you expect to earn.

Knowledge

What Are PAYG Instalments?

Pay as you go (PAYG) instalments are prepayments towards your own income tax on business or investment income. The ATO credits them when it works out your tax for that year. A variation lets you change the instalment amount or rate if your expected tax has changed.

Knowledge

What Are PAYG Instalments?

See where the money goes

You’ve paid the tax bill from your first profitable year. Then another notice arrives. Before you move money out of the business again, check the period printed on each notice. Your tax assessment looks back at a completed year. A pay as you go (PAYG) instalment puts money towards the tax on business or investment income for a later year.

Say your final income tax for the year comes to $30,000 and you’ve already paid $24,000 in PAYG instalments for that year. With no other credits or adjustments, the balance is $6,000. The instalments have already done part of the work. The pinch often comes in the first cycle, when the previous year’s balance falls due around the time you start paying ahead.

The ATO generally bases an instalment amount on information from your latest return. If your notice offers the instalment rate method, the rate is applied to your instalment income for the period. Check which method your notice uses before comparing this quarter with the last one.

What if a big contract has finished?

Rebuild the estimate using fees earned to date, work you realistically expect to invoice and deductible expenses for the year. You may be able to vary an instalment if the expected tax has changed. Keep the calculation behind your estimate. Varying too low can lead to interest or penalties. If the tax estimate is sound and you’re short of cash, speak to your adviser about payment options.

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Your tax payments should fit into a plan you can follow.

You might be adjusting to your first profitable year, finishing a large contract or earning investment income alongside your salary. A new instalment notice can be hard to place when several tax dates overlap.

Bon Conseil helps you understand which year each payment covers and how it fits with your expected income. We review the figures with you throughout the year, so you can plan for upcoming payments and assess whether a variation makes sense.

Let’s work out what your next notice means.

Bring your latest assessment, instalment notice and an idea of what you expect to earn. We can help you put the amounts and due dates into a practical cash flow plan.

Get in touch with Bon Conseil about your PAYG instalments. You don’t need to decipher the notice before you call.

Good advice makes a difference.

From your first tax return to building a business or planning for retirement, Bon Conseil supports individuals, families and businesses at every stage. Our qualified accounting, tax and advisory professionals bring years of experience, specialist knowledge and genuine care to every client relationship.