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What are PAYG instalments?

PAYG instalments are regular tax prepayments made to the ATO during the year. Rather than paying your SMSF’s full tax bill in one lump sum when the annual return is lodged, the ATO may require the fund to pay smaller amounts throughout the year.

Why is my SMSF in the PAYG instalment system?

If your SMSF earns above certain income thresholds, the ATO may automatically place it into the PAYG instalment system. This is designed to help spread tax payments across the year instead of having them fall due all at once at tax time.

How does the ATO calculate PAYG instalments?

The ATO generally calculates instalments based on your fund’s previous business and investment income, or prior tax payable. That means the amount is usually based on historical results, not necessarily what your fund will earn this year.

How often do PAYG instalments need to be paid?

Most SMSFs pay PAYG instalments quarterly, which means every three months. In some cases, the ATO may require annual instalments instead.

Are PAYG instalments the same as my SMSF’s annual tax?

No. PAYG instalments are not an additional tax. They are prepayments toward your SMSF’s annual tax liability.

When your SMSF tax return is lodged, the instalments already paid are credited against the final amount owing. This usually means either:

• there is little or no extra tax to pay, or
• the fund may receive a refund if too much was paid.

What happens when my SMSF tax return is lodged?

Once the annual SMSF tax return is lodged, the ATO reconciles the instalments already paid against the fund’s actual tax position for the year. If the instalments cover the liability, there may be nothing further to pay. If too much was paid, the fund may receive a refund.

What does Stake do to help manage PAYG instalments?

Stake helps simplify PAYG instalment obligations by:

• managing PAYG instalment lodgements
• notifying you before each due date
• allowing you to review and request changes
• automatically paying the ATO if no changes are requested and there are sufficient funds in your Stake AUD account.

Do I need to do anything?

In most cases, no action is needed unless you want to:

• adjust the instalment amount, or
• make sure there are enough funds in your Stake AUD account for payment.

What happens if there are not enough funds in my Stake AUD account?

If there are insufficient funds in your Stake AUD account, the PAYG payment may not be processed. If that happens, Stake will notify you and you will need to either fund the account or arrange payment directly with the ATO.

Can I change or reduce my PAYG instalments?

Yes. You may be able to request a variation if you expect your SMSF’s income for the year to be lower than in the previous year.

You should be careful when varying instalments downward. If you reduce them too far and end up paying less than 85% of your actual tax liability, the ATO may apply interest or penalties.

Can I opt out of PAYG instalments?

If your expected tax liability is low, you may be able to vary your instalment to zero. Otherwise, PAYG instalments are generally mandatory once the ATO has enrolled your SMSF in the system.

What happens if I miss a PAYG instalment?

If a PAYG instalment is missed, the ATO may charge interest and penalties. You may still be able to pay the amount later, either through Stake if funds are available or directly to the ATO.

Will Stake notify me before payments are made?

Yes. Stake will notify you before lodgement and payment so you have the opportunity to review the instalment and request changes if needed.

Where can I see my PAYG instalments?

You can usually view PAYG instalments through ATO Online Services or in correspondence issued by the ATO.

What if my SMSF’s income changes from year to year?

PAYG instalments are generally based on prior year income or tax payable. If your current year income is expected to be materially different, you may be able to vary the instalment amount to better reflect your current position.

Who is responsible for PAYG obligations?

The trustees of the SMSF remain ultimately responsible for meeting the fund’s tax obligations. Stake assists with lodgement and payment as part of its service, but trustee responsibility still applies.

Do PAYG instalments apply if my SMSF only has capital gains income?

Yes. Even if your SMSF’s income is primarily made up of capital gains, the ATO may still place the fund into PAYG instalments based on prior tax payable.

Is PAYG always a bad thing?

Not necessarily. PAYG instalments can actually make tax obligations easier to manage by spreading payments across the year, rather than leaving the full amount payable at annual tax time. This can help smooth cash flow and reduce the chance of a large unexpected bill.

When should I contact Stake?

You should contact Stake if:

• you want to vary your instalment amount
• you believe the instalment amount is too high
• your fund’s expected income has changed materially
• there may not be enough cash in your Stake AUD account before the due date
• you have received ATO correspondence you do not understand

Important information

Stake can assist with PAYG instalment lodgement and payment workflows, but trustees should consider their fund’s circumstances carefully before requesting a variation. Reducing instalments too far can lead to ATO interest or penalties.