ATO Correspondence
PAYG Instalments
Pay as you go (PAYG) instalments are regular payments towards your expected tax liabilities based on projected business and investment income for the financial year.
These instalments will be credited against your final tax assessment upon lodgement of your tax return.
One Annual Instalment
Where your notional tax is less than $8K, you can choose to pay just one annual instalment of PAYG provided that you are not registered for GST or are a partner in a GST registered partnership. If you are registered for GST or are a partner in a GST registered partnership you must pay instalments quarterly (see below).
If you elect to use this option the amount of the instalment you pay can be:
- Your notional tax amount as notified as above; or
- An estimate of your actual tax for the year.
The ATO will send you an annual instalment notice before payment is due.
Quarterly Instalments
Your first quarterly Instalment Activity Statement (IAS) will offer two options to calculate the amount of your instalment:
Option 1 - You can pay the amount based on ¼ of your GDP-Adjusted Notional Tax.
Option 2 - You can pay an amount you work out based on your investment and business income for the quarter and your “Instalment Rate”.
We recommend that you prepare the IAS based on Option 1 as Option 2 requires quarterly calculation of your instalment income which can be onerous. Please contact us if you wish to investigate Option 2.
Further, should you choose Option 1, in future quarters you will receive a PAYG Instalment Notice instead of an IAS. The PAYG instalment notice does not need to be lodged with the ATO, it just needs to be paid by the relevant due date.
Please note that if you don’t indicate your choice on your first IAS (by the due date) you will have to use Option 1 for that income year.
Payment and lodgement of your IAS will be due after the end of each quarter (ie - by 28 October, 28 February, 28 April, and 28 July).
Variation of Instalments
- Please note, if your circumstances change you have the option to vary your instalment downward under either of the methods above. If, however, this results in an underestimation of your annual tax, penalties may apply. Please contact us for further advice if you wish to make a variation.
Quarterly GST Instalment Notice
This form relates to the payment of your quarterly GST instalment, and where applicable, your quarterly PAYG income tax instalment. You have received this notice instead of a Business Activity Statement because you have elected to use the GST instalment method.
Your GST instalments are credited against your actual net GST liability on lodgement of your annual GST reconciliation return. Any shortfall will be payable and any over-payment refundable upon lodgement of this return which is due together with your income tax return.
Your PAYG instalments, where applicable, will be credited against your final tax assessment upon lodgement of your tax return.
You have the option to vary your GST and/or PAYG Instalment if you think your instalments will exceed your likely tax payable for the financial year. If, however, this results in an underestimation of your annual tax, penalties may apply. Please contact us for further advice if you wish to make a variation.
Division 293
Division 293 tax is an additional tax of up to 15% on concessional superannuation contributions for high income earners.
An individual is generally liable to pay Division 293 tax if the sum of their “income” and their “low tax contributions” is greater than $250,000.
“Income” for Division 293 tax purposes is generally the sum of your:
- Taxable Income;
- Total Reportable Fringe Benefits amounts (RFBA - as reported on your payment summaries);
- Net financial investment losses; and
- Net rental property losses.
“Low tax contributions” are generally contributions made in a financial year to a complying super fund in respect of a member which are included in the assessable income of the fund. This includes:
- Employer contributed amounts (including salary sacrifice contributions);
- Other family and friend contributions;
- Assessable foreign fund amounts; and
- Assessable amounts transferred from reserves.
Note, excess concessional contribution amounts are subtracted out of the low tax contribution amount for Division 293 tax purposes.
How to Pay:
You can pay your Div.293 liability either with your own money or you can elect to release money from your superannuation by completing a Div.293 election form, available via your myGov account or may be downloaded from the ATO website at: Division 293 – paper election forms | Australian Taxation Office (ato.gov.au)
Deferred liabilities:
Where your contributions are solely attributable to a defined benefit superannuation interest, you Div.293 tax liability will be automatically deferred. There is no obligation for you to prepay your deferred liability, however should you wish to do so you can either pay the amount with your own money or elect to release money from other accumulation interests by completing a Div.293 debt election form, available via your myGov account or may be downloaded from the ATO website at: Division 293 – paper election forms | Australian Taxation Office (ato.gov.au).
Each year it remains unpaid, the balance of your Div.293 deferred tax account will accrue interest on 30 June based on the average 10-year bond rate.
If not paid earlier, your accumulated deferred Div.293 tax debt becomes payable when a superannuation benefit is paid from the defined benefit account to which it is attributed. Generally, a benefit is paid when you receive a superannuation lump sum, commence a pension or rollover your benefit to another fund. Your fund will notify the ATO who will then calculate and notify you of your “debt account discharge liability”. Again, this amount can either be paid with or own money, or using the release authority which will issue with the debt account discharge liability notice to pay the debt out of your superannuation account. Note, should a deferred Div.293 liability remain unpaid at the time of your death the debt account discharge liability notice will issue to your estate for payment.
Superannuation Excess Contributions Notice
Superannuation funds report contribution information to the ATO each financial year. This information is used to determine if overall, your concessional and/or non-concessional superannuation contribution caps have been exceeded. Any contribution over the relevant cap amount may be subject to additional tax.
Note, the ATO has a discretion to reduce the amount of excess contributions subject to tax if genuine inadvertent breaches outside of your control arise, by disregarding contributions or reallocating the contributions to a different income year. In exercising discretion, the Commissioner may have regard to the following factors:
- Whether contributions would be more appropriately allocated to a different year,
- Whether it was reasonably foreseeable a cap would be breached when the contribution was made,
- The terms of any agreement covering the amount and timing of contributions, and
- The extent of the individuals control over the making of the contribution.
Excess Concessional Contributions
If you exceed your annual concessional contributions cap, the ATO will notify you. Your excess contributions are then included in your assessable income, meaning they are taxed at your marginal tax rate, minus a 15 per cent tax offset to reflect the contributions tax you paid when the money entered your superannuation account.
You have the following options with regards to how your excess concessional contributions are treated:
Option 1 – Do nothing and leave the excess in your super fund(s). The excess amount will count towards your non-concessional (after tax) contributions, which also has an annual cap. If you go over your non-concessional cap you will receive further correspondence from the ATO.
Option 2 – Release the excess from your super fund(s). Release the funds from your super fund(s). Any amount you release will no longer count towards your non-concessional (after tax) contributions.
Superannuation Excess Non-Concessional Contributions Assessment
If you exceed your annual non-concessional contributions cap, the ATO will notify you.
You have the following options with regards to how your excess non-concessional contributions are treated:
Option 1A – Release Amounts from Superannuation (ATO Option – Do Nothing)
Under this option, you are electing to release funds from your super fund(s), being your entire excess non-concessional contribution amount plus 85% of the “associated earnings amount”. This amount is calculated based on your excess non-concessional contribution amount and is to recognise the fact that the excess amount has benefited from investment in your super fund(s).
By choosing this option you are also electing to have the associated earnings amount included as income in your tax return (taxed at your marginal tax rate). A non-refundable tax offset equal to 15% of the associated earnings amount will be applied to the amended assessment to recognise the tax paid on the earnings by your super fund(s).
Note, if you do not wish to make an election to choose which super fund(s) to release the money from (refer Option 1B below) YOU DO NOT NEED TO DO ANYTHING FURTHER. The ATO will approach your super fund(s), in order of which has the highest reported account balance, requesting release of the funds. Released funds are paid to the ATO and will be used to pay any tax or other Australian governments debts due, with the balance refunded to you.
If the ATO assess that you have no money left in super, including pensions or interests in defined benefit funds, they will send a direction letter confirming this. Note, they will still amend your tax return to include the full amount of associated earnings as income (taxed at your marginal tax rate) and apply the 15% non-refundable tax offset as above. The amended assessment will issue in due course.
Note, should the ATO exhaust all of your super accounts, and your only super interest left is held in a Defined Benefit Fund and the fund cannot or will not voluntarily release, you will receive an excess non-concessional tax assessment (refer Option 2 below).
Option 1B – Release Amounts from Superannuation (Election Option)
If you wish to choose which super fund(s) to release the funds from, you will need to complete an Excess non-concessional contributions election form. This form is available via your myGov account or may be downloaded from the ATO website at: Excess non-concessional contributions election form.
As with Option 1A (above), the ATO will amend your tax return to include the full amount of associated earnings as income (taxed at your marginal tax rate) and apply the 15% non-refundable tax offset to the amended assessment.
Funds released are paid to the ATO and will be used to pay any tax or other Australian governments debts due, with the balance refunded to you.
Option 2 – Pay Excess Non-Concessional Contributions Tax on The Excess Amount
If you choose not to release your excess non-concessional contributions, the excess will be taxed at the highest marginal tax rate and the ATO will send you an excess non-concessional tax assessment.
To choose this option you need to complete an Excess non-concessional contributions election form. This form is available via your myGov account or may be downloaded from the ATO website at: Excess non-concessional contributions election form.
On the form you can also nominate which super fund(s) you would like the tax amount to be released from. If your nominated fund is unable to release the full amount of your excess non-concessional tax liability the ATO will attempt to release the balance from your other super funds. Where this is not possible, you will need to pay the liability from your own funds.
