Tax cut to quarterly PAYG

[The Office Witch]

Last month the government announced in order to assist small businesses during the global financial crisis, it would provide a tax cut to the quarterly Pay As You Go (PAYG) instalment.

The PAYG reduction will only be available to small enterprises that have a combined turnover of $ 2 million per annum or less.

PAYG instalments due on either 21 January 2009 or 28 February 2009, will have the amount payable reduced by 20 per cent.

Businesses will not need to calculate anything; the reduced amount will show on the BAS statement, automatically reduced by the ATO.

It is important to remember that it is not a Christmas present from the government; it is only a temporary relief.

The PAYG instalment is an estimated amount, calculated by the ATO based on income from the previous tax year. This system is for paying instalments towards the expected tax liability on the business and investment income for the current income year. PAYG instalments for the year are credited against the actual assessment to determine whether tax is payable or a refund is due.

The 20 per cent reduction is an assistance for now but it might become payable at the end of the financial year depending on your tax liability. So don’t go and spend it just yet!