PAYG Instalment Calculator Australia (2026–27)
Calculate your quarterly PAYG Instalment tax payments for sole traders, freelancers, investors, and small businesses. Model Option 1 ATO percentage rates vs Option 2 fixed dollar amounts.
Gross revenue excluding GST, salary income, and tax withheld.
Rate supplied on your ATO Activity Statement (or variated rate).
Used to verify if prepayments cover end-of-year tax liability.
Estimated Quarterly PAYG Instalment Due
$2,275
Amount payable per quarter on your BAS / IAS return.
Projected Annual PAYG Prepayments
$9,100
4 quarterly instalments remitted to the ATO.
Projected Tax Refund Credit
$100
Prepayments exceed expected tax liability.
PAYG Instalment Summary & Variation Risk Assessment
1. The Australian PAYG Instalment Framework (2026–27)
The PAYG (Pay-As-You-Go) Instalment system is governed by Schedule 1 of the Taxation Administration Act 1953.
It helps sole traders and investors avoid large year-end tax debts by spreading income tax payments across four quarterly Business Activity Statements (BAS).
2. Business Income Tiers & Quarterly BAS Benchmarks
| Annual Business Income | ATO Instalment Rate (%) | Quarterly BAS Tax | Annual Prepaid Tax | EOFY Reconciliation |
|---|---|---|---|---|
| $80,000 Business Income | 7.5% ATO Rate | $1,500 / quarter | $6,000 Total Prepaid Tax | Square / Minor Refund |
| $150,000 Business Income | 12.0% ATO Rate | $4,500 / quarter | $18,000 Total Prepaid Tax | Square / Minor Refund |
| $250,000 Business Income | 18.0% ATO Rate | $11,250 / quarter | $45,000 Total Prepaid Tax | Square / Minor Refund |
| $400,000 Business Income | 22.0% ATO Rate | $22,000 / quarter | $88,000 Total Prepaid Tax | Square / Minor Refund |
3. The Mathematics of Option 1 Rate vs Option 2 Amount
Quarterly PAYG Instalment (Tax_qtr) under Option 1 (Instalment Rate) for quarterly gross income (Inc_qtr) and ATO rate (r_ato %) is:
Example Calculation ($50,000 Q1 Sales @ 12.0% ATO Rate):
- Gross Quarterly Turnover: $50,000.
- ATO Option 1 Instalment Rate: 12.0%.
- Q1 BAS PAYG Tax Liability = $50,000 × 12.0% = $6,000.00 BAS payment.
- $6,000 is credited directly toward the sole trader’s annual ATO tax return.
4. Step-by-Step Guide to Managing PAYG Instalments
Determine Quarterly Gross Business & Investment Income
Sum gross sales, fees, dividends, and interest received during the 3-month BAS quarter.
Identify ATO-Issued PAYG Instalment Rate (%) or Fixed Dollar Amount
Locate your official ATO instalment rate percentage or fixed dollar amount on your BAS statement.
Calculate Quarterly PAYG Tax Payment Liability
Multiply quarterly gross income by the ATO instalment rate (Option 1) or enter fixed dollar amount (Option 2).
Assess Need for Rate Variation (If Income Fluctuates)
Model projected annual tax liabilities to determine whether to vary the ATO rate on item T3.
Lodge Quarterly BAS & Transfer Pre-Paid Tax to ATO
Lodge BAS via myGov, Online Services for Business, or tax agent by statutory quarterly due dates.
5. PAYG Instalment Mistakes & Checklist
Varying PAYG Instalment Rates Down Too Aggressively
Varying your instalment rate to zero when business profits continue, triggering ATO General Interest Charges (GIC).
Calculating Option 1 Rate on Net Profit Instead of Gross Income
Applying Option 1 percentage rates to net profit after expenses rather than gross business turnover.
Ignoring ATO Entry Notices for PAYG Instalments
Ignoring ATO letters entering you into PAYG instalments, resulting in overdue BAS tax debts and late fees.
Forgetting PAYG Instalments Reduce Year-End Income Tax Bills
Treating quarterly PAYG instalments as an extra tax burden rather than pre-paid installments against your final tax return.
PAYG Instalment Compliance Checklist
Quarterly Gross Business Sales Reconciliation
Reconcile accounting software sales totals (GST-exclusive) for accurate Option 1 rate calculation.
ATO BAS Lodgment Deadline Calendar Sync
Set reminders for 28 Oct, 28 Feb, 28 Apr, and 28 Jul quarterly BAS payment deadlines.
85% Variation Penalty Buffer Verification
Ensure varied instalment rates cover at least 85% of actual annual tax to avoid ATO interest charges.
Year-End PAYG Credit Notice of Assessment Audit
Verify all 4 quarterly BAS payments are credited on item 13N of your annual income tax return.
6. Quarterly BAS PAYG Instalment Timeline
Quarter 1 PAYG Instalment Lodgment
Lodge Q1 BAS covering July – September business and investment income.
Quarter 2 PAYG Instalment Lodgment
Lodge Q2 BAS covering October – December business and investment income.
Quarter 3 PAYG Instalment Lodgment
Lodge Q3 BAS covering January – March business and investment income.
Quarter 4 PAYG Instalment Lodgment
Lodge Q4 BAS covering April – June business income; finalize annual pre-paid tax totals.
Disclaimer: This PAYG Instalment calculator and guide are provided for general educational and informational planning purposes only. Option 1 percentage rates, Option 2 fixed amounts, GDP adjustment factors, and variation rules reflect 2026–27 Australian Taxation Office guidelines. This page does not constitute formal tax or accounting advice.
Charlotte Smith
Senior Personal Finance & Taxation Specialist at AussieSpot
Charlotte Smith is the lead personal finance advisor and workplace specialist at AussieSpot. Charlotte has over 12 years of experience helping Australian households build budgets, plan savings goals, and manage living costs.
Frequently Asked Questions (FAQ)
What are PAYG Instalments and who must enter the ATO system?
PAYG (Pay-As-You-Go) Instalments are regular quarterly tax payments made by sole traders, freelancers, investors, and companies to pre-pay income tax on business and investment income. The ATO automatically enters taxpayers into the system when tax on gross business/investment income exceeds $4,000.
What is the difference between Option 1 (Instalment Rate) and Option 2 (Instalment Amount)?
Option 1 calculates quarterly tax by applying an ATO-issued percentage rate to your actual gross business income for that quarter. Option 2 pays a fixed dollar amount calculated by the ATO based on your prior year’s tax return.
Can I vary my ATO PAYG Instalment rate if my business income drops?
Yes! You can vary your PAYG instalment rate on your quarterly Business Activity Statement (BAS) if your income decreases. However, if you vary your rate down by more than 15% below your actual annual tax liability, the ATO may charge General Interest Charges (GIC).
When are quarterly PAYG Instalment BAS lodgments due?
Quarterly BAS due dates are: Q1 (28 October), Q2 (28 February), Q3 (28 April), and Q4 (28 July). Taxpayers lodging via a registered tax or BAS agent receive a 4-week extension.
How do pre-paid PAYG Instalments affect your year-end income tax return?
All quarterly PAYG instalments paid during the financial year are credited against your final tax liability. If total instalments paid exceed your actual tax bill, the ATO refunds the surplus.