ATO empathy toward PAYG instalment variations
The ATO is expected to adopt a ‘benign approach’ to PAYG instalment variations in the wake of recent disasters, according to a professional accounting body.
The ATO’s current position is that if varied instalments are less than 85% of the total tax payable of the instalment income for the financial year, general interest charge (GIC) on the difference, as well as penalties, may apply.
As accountants, we are looking to help vary PAYG instalments to provide timely cash flow benefits for our business clients in the wake of bushfires, floods and the coronavirus outbreak.
Questions have been raised about the ATO’s position on interest and penalties with some conjecture that they will adopt a facilitative approach this quarter should the varied instalments breach the 85% tolerance level.
It’s hard to know when businesses impacted by disaster will get back on their feet.
The ATO has already indicated a level of empathy towards small businesses doing it tough due to factors outside their control:
It’s also important to take account of the nature of any compensation receipts received. For businesses, PAYG instalments are based on the concept of ordinary income, not statutory income, and business owners need to understand the difference.
The PAYG quarter will be a telling signal for the government about the budget impact of bushfires, floods, the coronavirus and the resultant downturn in consumer demand or output.
Business owners and primary producers feeling the effects of recent events are urged to reach out for professional help, while the government has been called to lend a hand to those feeling the pinch:
Now is not the time for complacency. There are solutions and processes that can buy a business or farm time, and the sooner these solutions are sought, the better. It’s vital to take action.