You don’t have to wait until tax time to start paying your income tax.
You can make voluntary payments towards your expected end of year tax bill at any time. Doing this helps you spread out the cost and reduces the likelihood of having to find a large lump sum at tax time.
Another option is to voluntarily register for pay as you go (PAYG) instalments. PAYG instalments allow you to pay regular amounts to the ATO throughout the year. These amounts are set aside and will be put towards your end of year income tax debt.
In some cases, the ATO may automatically register you for PAYG instalments. This usually happens after you lodge your first tax return, depending on how much income you report for the year.
Example: Voluntary registration
Jordan is a self‑employed graphic designer whose income varies from month to month. In the previous year, Jordan found tax time stressful because she’d received a large tax bill that she hadn’t really prepared for.
To make things easier this year, Jordan voluntarily registers for PAYG instalments. This allows her to make regular monthly payments towards her expected tax bill throughout the year, instead of waiting until she receives her notice of assessment.
By paying smaller, manageable amounts during the year, Jordan avoids the pressure of having to pay a large lump at tax time. When her tax return is processed, the amounts she has already paid are credited against her tax bill. If she has paid more than needed she will receive a refund. If she hasn’t paid enough, she will only need to pay the gap.
Voluntarily registering for PAYG instalments helps Jordan maintain her cash flow and manage her end of year tax bill.
