ATO advises of PAYG instalment and company tax rate error
On 10 November 2020, the ATO advised that the recent reduction in the company tax rate had not been applied correctly in its systems from 1 July 2020. The error, which resulted in pay-as-you-go (PAYG) instalments being calculated using the former rate of 27.5% and not the correct 26%, affected companies that are base rate entities with an aggregated turnover of less than $50 million.
The ATO has now corrected the error and will issue a new PAYG instalment letter to affected companies reflecting their correct instalment rate or amount.
Small businesses who have lodged and paid
If you have lodged your activity statements and paid an amount based on the incorrect instalment calculation, the ATO will refund the overpaid amount shortly. No further action is required from these businesses.
If you have varied your instalment amount or rate, you will not be affected by these changes.
Small businesses yet to lodge
When you lodge:
• if you choose to lodge based on the current instalment calculation on your activity statement, the ATO will apply the correct rate and refund any excess amount due to the error; or
• if you have intended to vary your instalment rate or amount, you can still vary, and the ATO will not adjust the varied amounts.
The ATO reminds businesses with an amount payable that it has a range of support options available, including the ability to enter into a payment plan.
Future activity statements
The ATO says that all future activity statements will have the correct rate applied.
If you have varied your instalment rate or amount, the variation will continue until the start of the next income year. You can continue to vary your activity statements if your rate or amount does not reflect your current trading situation.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 4 Bowen Street Toowoomba.