Annual tax payments need registration

HUNDREDS of thousands of people need to indicate to the Australian Taxation Office (ATO) that they wish to continue to pay their tax on an annual basis or the ATO will register them for quarterly payments, says CPA Australia’s tax consultant Garry Addison.

Those affected include small business owners, self-funded retirees and other investors who are not in the GST system.

“If people were previously paying provisional tax on an annual basis and they are still entitled to pay annually, it is generally a far better option to elect to continue to do so,” Mr Addison said.

“However, they need to indicate this on the PAYG Annual Election Form, no later than October 21, or the ATO will automatically register them for quarterly lodgment. They would then be stuck with quarterly lodgments for the whole of this financial year.

“If they can pay annually, it will not only be easier and simpler, but it will help to ease their cash flow. Also, those who elect to pay annually do not need to calculate a quarterly instalment rate. Annual payers will be advised by the ATO how much they owe without having to make their own calculations.”

Mr Addison believes that there is considerable confusion in the community surrounding the Pay-As-You-Go (PAYG) issues of the New Tax System. This has arisen because of a strong focus on the GST and a general lack of understanding by small business and investors of their PAYG obligations and entitlements.

While those in the GST system do have to cope with significant changes, for entities subject to provisional tax, such as investors and self-funded retirees, there is little change from the old system, except that those eligible for annual payments must now specifically opt out of the quarterly PAYG system.

Those people with an annual tax liability of $8,000 or less can elect to pay PAYG annually, as long as they are not in the GST system.

This category generally includes passive investors such as self-funded retirees and some small businesses who would previously have been paying provisional tax annually.

Those who have previously paid provisional tax on a quarterly

basis will probably have to pay PAYG quarterly.

Mr Addison urged people who are confused to either check with the ATO or visit an accountant concerning this matter.

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