PAYG instalments are regular prepayments of the income tax you expect to owe on your business and investment income in Australia, usually paid quarterly, 28 days after each quarter ends. As of October 2026, an individual or sole trader is entered automatically with instalment income of $4,000 or more, tax payable of $1,000 or more and notional tax of $500 or more, and what you pay is credited against your tax when you lodge your return.
They're not the same as PAYG withholding. Withholding is the tax an employer takes from wages; instalments are what you prepay on your own business and investment income so you don't get one large bill at tax time.
Who has to pay PAYG instalments
| You are | The ATO enters you automatically if |
|---|---|
| An individual (including a sole trader) or a trust | All three apply: instalment income of $4,000 or more on your latest return, tax payable of $1,000 or more on your latest notice of assessment, and notional tax of $500 or more |
| A company or super fund | Any one applies: instalment income of $2 million or more, notional tax of $500 or more, or it's the head company of a consolidated group |
Instalment income is your gross business and investment income, excluding GST and any capital gains. If you're new to business, the ATO suggests you can enter voluntarily so you're not hit with a large first bill.
When PAYG instalments are due
| Quarter | Period | Due date |
|---|---|---|
| 1 | July to September | 28 October |
| 2 | October to December | 28 February |
| 3 | January to March | 28 April |
| 4 | April to June | 28 July |
- Most taxpayers pay quarterly. Businesses with instalment income of more than $20 million pay monthly.
- If you lodge your activity statement online you may be eligible to lodge and pay 2 weeks later than these dates. If you pay GST monthly, your due date is the 21st of each month and the extension doesn't apply.
- Some primary producers and special professionals (authors, inventors, performing artists, production associates and sportspeople) can pay in 2 instalments: 75% by 28 April and the rest by 28 July.
- If you get an instalment notice and pay the amount shown, you don't need to lodge it.
Instalment amount or instalment rate?
If you're offered both, you choose when you lodge and stick with it for the rest of the financial year. Neither option changes the tax you pay for the year.
| Option | How it works | Suits |
|---|---|---|
| Option 1: instalment amount | You pay the amount the ATO calculates from your latest return, shown at T7 | Steady income; nothing to calculate |
| Option 2: instalment rate | You enter your instalment income at T1, multiply by the rate at T2, and enter the result at 5A | Income that changes a lot, because the payment moves with it |
How to vary, and the 85% rule
- Decide whether you need to. On option 2 you usually only vary if the taxable proportion of your income has changed. On option 1, vary if your instalment income has changed significantly.
- Estimate your instalment income for the full year, then the tax on it. The ATO's PAYG instalments calculator does both.
- Enter the varied amount or rate on your activity statement or instalment notice, on or before the day the instalment is due and before you lodge your tax return.
- Keep paying the varied figure for the rest of the year, or until you vary again.
Be careful going low. If your varied instalments come to less than 85% of the tax payable on your instalment income, the ATO may charge the general interest charge on the difference, on top of the shortfall, and possibly penalties. Its own advice: if you're not sure, don't vary, because any overpaid instalments are refunded after you lodge.
How the ATO tells you to start
The ATO lets you know when you've entered the system. If you have myGov linked to an ATO account, it's a letter in your myGov Inbox. If you use Online services for business or Standard Business Reporting software, you get your instalment information 21 days before the due date. Otherwise it's a paper letter, plus an SMS reminder if the ATO has your mobile number. The letter tells you when and how often to pay and how much, and you start paying once you get an activity statement or instalment notice.
The ATO's investor example shows why voluntary entry can help. Rob expects $55,000 of rent and $5,500 of deductions, so the calculator estimates $7,544 of tax, or $1,886 a quarter. If he doesn't enter voluntarily, he gets the whole bill when he lodges and is entered automatically the year after.
The ATO's sole trader example
Danielle expects business income of $100,000 with $10,000 of deductions. The calculator puts her PAYG instalments at $20,437 for the year, so she sets aside $393.02 a week. When her quarterly BAS arrives the cash is set aside, and at tax time her instalments are offset against her tax. If you're still setting up, see ATO online services for where your instalment notices appear, and super for sole traders for the other quarterly habit worth starting.
The verdict
PAYG instalments aren't an extra tax, they're your tax paid in four pieces instead of one. If your income is steady, take option 1 and pay what the ATO asks. If it swings, option 2 keeps payments in line with what you earn. Vary only when something has changed, and never below what you can justify, because the 85% line is where the interest starts.
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Frequently asked questions
What are PAYG instalments?
Regular prepayments of the expected income tax on your business and investment income, credited against your tax when you lodge your return.
When are PAYG instalments due?
Generally 28 days after the end of each quarter: 28 October, 28 February, 28 April and 28 July.
Who has to pay PAYG instalments?
An individual or sole trader with instalment income of $4,000 or more, tax payable of $1,000 or more and notional tax of $500 or more is entered automatically. Companies have their own thresholds.
What is the difference between PAYG instalments and PAYG withholding?
Instalments are prepayments on your own business and investment income. Withholding is tax employers take from employees' pay and send to the ATO.
Can I change my PAYG instalment amount?
Yes, you can vary it on your activity statement or instalment notice by the due date, but if your varied instalments are under 85% of your tax payable you may be charged interest.
Can I join PAYG instalments voluntarily?
Yes. Individuals and sole traders can request it through myGov linked to ATO online services, and businesses through Online services for business or a tax agent.
