THE PAYG SYSTEM Essay Example | Topics and Well Written Essays - 500 words

THE PAYG SYSTEM - Essay Example The tax tables under PAYG system are structured to result in a refund when an Income tax return is processed. This refund culture encourages strong compliance with annual returns. PAYG also provides flexibility, ability to alter the taxation payments based on the current income received. PAYG has removed lack of equity in payment timing between individuals and companies. Henceforth, tax payers need to file only one form and make one payment for each quarter. PAYG allows the netting off Liabilities and credits. Tax payers like Individuals, Corporate, Trustees, Mutual insurance associates, etc having Business and Investment income are subjected to PAYG Installment system. A taxpayer is subjected to PAYG installment system if his most recent income tax assessment shows more than $2000 of gross investment or business income or if his recent income tax return resulted in a tax debt of over $500. PAYG installments are generally payable quarterly. The due dates by which quarterly installments are required to be paid are 28th July, 28th October, 28th February and 28th April. Certain tax payers like primary producers and Special professionals can pay two installments per year. These tax payers need to pay 75% of PAYG liability by 28th April and the balance by 28th July. A tax payer is eligible to opt for paying PAYG installment annually under the following circumstances: Payments made to tax payers having income other than business or Investment income like Salaries and wages, Pension Annuity, Dividend, Interest, Royalty are subjected to PAYG Withholding system. PAYG withholding is also applicable to payments to other businesses who do not quote Australian Business Number. Employers deduct tax according to the published tables from wages and the net amount is paid to employees. Employers send the amounts withheld to taxation office, hence this system is called Withholding system. Tax payer has to determine the status of the payees like