PAYG Instalment Calculator Australia 2025-26
Estimate your quarterly PAYG instalment amounts for 2025-26 as a sole trader, investor, or small business. Enter your expected annual income and the ATO instalment rate from your activity statement — this calculator shows each quarterly amount, annual tax estimate, and flags when you should consider varying. All calculations run privately in your browser.
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How PAYG Instalments Work in Australia
PAYG (Pay As You Go) instalments are a system the Australian Taxation Office (ATO) uses to collect income tax from business owners, sole traders, self-funded retirees, and investors throughout the year — rather than in a single lump sum at tax time. The ATO automatically enrolls taxpayers once their tax bill from the previous year exceeds $1,000 and their business or investment income exceeds $4,000. Based on ATO guidance for 2025-26, the system ensures tax is paid progressively so taxpayers are not caught with a large bill at the end of the financial year.
There are two main calculation methods. The rate method (T2) applies a percentage rate to your actual instalment income each quarter. The amount method (T7) uses a pre-calculated fixed amount determined by the ATO from your prior year tax return. Most small businesses use the rate method as it automatically adjusts for quarterly income variations. Investors with rental or dividend income often use the amount method for simplicity.
When and How to Vary Your PAYG Instalment
You can vary your PAYG instalment downward if your income has dropped significantly compared to last year — for example, if your business has had a slow quarter or you sold an investment property and your income will be lower this year. To vary, select option 2 on your BAS and enter your revised amount. The key rule is the 85% safe harbour: if you pay at least 85% of your actual tax liability during the year through instalments, you will not be charged the general interest charge (GIC) even if your varied amount turns out to be less than needed.
The GIC rate for Q3 2025-26 is approximately 11.17% per annum (updated quarterly by the ATO). If you vary downward to 0% and owe a large tax bill at year end, you face GIC from each original due date. For sole traders with volatile income — such as construction, consulting, or freelance work — it is worth recalculating your expected annual tax each quarter and varying as needed rather than overpaying throughout the year.
PAYG Instalments for Sole Traders and Investors
Sole traders who pay PAYG instalments include their instalment income and tax credits on their individual income tax return at the end of the year. If you overpay through instalments, the excess becomes a tax credit on your assessment — meaning a refund or reduction of remaining tax. If you underpay, you pay the difference on assessment. This calculator helps sole traders, freelancers, and investors estimate their quarterly amounts based on expected income for 2025-26 using ATO 2025-26 instalment rates. Last updated: March 2026. Always verify your instalment rate on your ATO pre-filled activity statement via myGov or your tax agent.