Insights · Tax · 31 October 2026

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PAYG instalments explained: paying tax as you go

PAYG instalments are regular prepayments of your expected income tax, usually quarterly with your BAS. They stop a large bill landing after your tax return, but only if they are set right.

How you get into the system

The ATO usually enters you automatically once your business or investment income reaches certain levels in your latest return. You can also opt in voluntarily.

Two ways to pay

• Instalment amount: pay the amount the ATO works out. Simple, but based on last year.
• Instalment rate: multiply your actual instalment income for the quarter by the ATO's rate. Better when income goes up and down.

Varying

If this year's income will be lower, you can vary instalments down. Be careful: if you vary too low, the ATO can charge interest. If income is rising sharply, consider paying more to avoid a shock.

Cash flow tips

• Put instalments in your cash flow forecast.
• Keep tax in a separate account: how much to set aside.
• Know the dates: BAS and tax due dates 2026–27.

Quick answers

What are PAYG instalments?

Regular prepayments of expected income tax, usually quarterly, credited against your tax when you lodge.

Can I change my PAYG instalments?

Yes, you can vary them, but varying too low can attract interest.

Sources

• ATO: Starting PAYG instalments
• ATO: Calculate your PAYG instalments

General information only. This article does not take into account your circumstances and is not tax, legal or financial advice. Rates and rules change; check the sources above and get advice for your business before acting.