What is PAYG?

PAYG stands for pay as you go.  PAYG has two common types, both make sure you pay the tax as you go through the year.  People on wages have tax deducted each time they are paid, this is called payg withholding, because the employer withholds the amount and sends it directly to the tax office.

Small business in the first year don’t pay any tax as they go but at year end if they have made a profit they pay the tax.  The tax office then raises payg instalments.  Based on the last years tax return they estimate the tax for the current year and divide into instalments.  These PAYG instalments are just like the tax taken out of wages, they are paid through the year and then count as a credit towards your year end tax bill.