PAYG instalments calculator
The two PAYG instalment methods side by side, and the working capital the wrong one ties up when your income has changed.
Covers 2026–27 income year · rates as at 2026-07-01
Quarterly instalment, rate method
Estimate$7,464.00
27.14% of each quarter's income, against a fixed 9,500 under the amount method
- Quarterly, amount method
- $9,500.00
- Tax you will actually owe
- $25,720
- Overpaid under the amount method
- $12,280
| Income this year | $110,000 |
|---|---|
| Instalment rate from last year | 27.14% |
| Rate method, a year | $29,857 |
| Amount method, a year | $38,000 |
| Tax actually payable | $25,720 |
- The amount method has you paying $12,280 more than you will owe, tied up until the return is assessed. On a falling income the rate method frees that working capital.
- You may vary an instalment down if you expect to owe less, but varying to below 85% of the eventual liability attracts a penalty.
The amount method uses last year’s $38,000 tax whatever you earn now. On a fall from $140,000 to $110,000 that overpays all year and waits for the refund.
Side by side
How this is calculated
The rate comes from last year, the income from this one
The ATO divides last year’s tax by last year’s income to get an instalment rate — $38,000 on $140,000 is 27.14%. Applied to this year’s actual income each quarter, it tracks reality instead of lagging it.
rate = prior year tax ÷ prior year incomeThe amount method lags by a full year
A fixed quarterly figure from your last return ignores what is happening now. Income falling from $140,000 to $110,000 means paying instalments sized for the higher year until you lodge and reclaim it.
quarterly amount = prior year tax ÷ 4Varying down has a penalty floor
You may vary an instalment if you expect to owe less, but varying to below 85% of the eventual liability attracts a general interest charge. The safe move is to vary to a realistic figure, not an optimistic one.
Worked example: Income falling from $140,000 to $110,000, last year’s tax $38,000
| This year | $110,000 |
|---|---|
| Last year | $140,000 |
| Last year's tax | $38,000 |
| Instalment rate | 27.14% |
|---|---|
| Amount method | $9,500 a quarter |
| Rate method | About $7,464 a quarter |
The rate method frees roughly $2,000 of working capital every quarter, which for a business having a lean year is the whole point of choosing it.
What this assumes
- Quarterly instalments rather than monthly or annual.
- Business or investment income only.
- No credits or offsets applied to the instalment.
- The prior year figures come from a lodged return.
Where this commonly goes wrong
- Instalments are a prepayment, not an extra tax — every dollar is credited against the final assessment, so the only real cost of overpaying is the working capital.
- You are automatically entered into PAYG instalments once investment or business income passes the threshold, which frequently surprises people in their first strong year.
- The choice between methods is locked for the year once the first instalment for that year is lodged, so the decision is made in the first quarter.
Questions
What is the difference between the two PAYG methods?
The amount method is a fixed quarterly figure from your last return. The rate method applies a percentage — last year’s tax over last year’s income — to this year’s actual quarterly income, so it tracks current earnings.
Which method should I choose?
The rate method if your income varies, because it moves with actual earnings. The amount method is simpler and fine for stable income, but it overpays all year when income falls and underpays when it rises.
Can I reduce my instalments?
Yes, you can vary them if you expect to owe less. But varying to below 85% of the eventual liability attracts a general interest charge, so an over-optimistic variation costs more than it saves.
Am I paying extra tax through PAYG instalments?
No. Instalments are a prepayment credited against your final assessment. Overpaying costs you the use of the money until the return is lodged, but not the money itself.
Why was I put into PAYG instalments?
Entry is automatic once your business or investment income passes the ATO threshold. It often follows a first strong year, which is exactly when the cash flow demand is least expected.
When are the instalments due?
Quarterly, generally 28 days after each quarter ends, with the fourth falling in late July. Some taxpayers pay monthly or annually depending on turnover and circumstances.
Related tools
Sources
General estimate based on published ATO rates for the 2026–27 income year. Not tax advice, and it does not consider your objectives, financial situation or needs. Confirm your position with the ATO or a registered tax agent.
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