PAYG instalments, explained simply.
If you earn business or investment income, the ATO may require you to make regular prepayments of your expected tax liability throughout the year. PAYG instalments prevent a large bill at year-end — but they have to be managed actively, not ignored.
The mechanics, in plain English.
- The ATO calculates your instalment amount or rate based on your most recent tax return.
- Instalments are generally paid quarterly, aligned with your BAS lodgement.
- You can choose to pay a set amount calculated by the ATO, or use the instalment rate method to calculate based on actual income each quarter.
Instalments sit on your BAS alongside GST and PAYG withheld. Our free BAS estimator adds it all up in one place — sales, purchases, PAYG withheld and the PAYG instalment amount → net BAS payable.
2025–26 PAYG calendar.
Put these in the diary now. Late payments accrue interest, and the ATO does not waive it for ‘forgot’.
- Q1 instalmentDue 28 October 2025
- Q2 instalmentDue 28 February 2026
- Q3 instalmentDue 28 April 2026
- Q4 instalmentDue 28 July 2026
When to vary your instalment.
If your income has changed significantly — up or down — you can vary your PAYG instalment to better match your actual tax position. Powerful cash flow tool, but it has to be done carefully.
Common reasons to vary:
- Business revenue has dropped significantly
- You have incurred major deductible expenses (asset purchases, R&D)
- Your business structure has changed
- You have ceased or started a new income stream
Under-estimating can attract interest charges. Over-paying ties up cash unnecessarily. The judgement is in matching the variation to a defensible projection of the remaining year — that is part of what we include in quarterly tax planning reviews on the Growth and Scale plans.
Quarterly reviews change everything.
Most of the PAYG-instalment pain comes from leaving the original ATO-calculated number on autopilot. The fix is a 30-minute quarterly review with your BAS Agent.