paying tax in advance, page-5

you are allowed to vary your PAYG ITI

look at the form carefully and their is a box that allows you to lodge a variation

for example, if you have made a loss for a quarter, you can vary the instalment to zero

thus you can change the PAYGI you pay each quarter according to your actual earnings (rather than pay the amount specified on the form)

however, to do this, you must calculate your quarterly income each quarter

this is not difficult to do, given, as a share trader, you know what your closing stock was for the previous year

so you can use your PORTFOLIO VALUE at the end of the quarter as your provisional closing stock for the quarter

so, for example, for the quarter ending 30 Sept 2011, your taxable income will be:

1. closing stock at 30 June 2011 PLUS
2. sales from 1 July 2011 to 30 Sept 2011 LESS
3. purchases from 1 July 2011 to 30 Sept 2011 LESS
4. portfolio value at close of trade 30 June 2011 LESS
5. your other expenses

this should give you a rough guide to your income earned for the quarter

for Sept quarter, multiply this income by 4, then work out the annual tax payable, then divide by 4 for your quarterly instalment

for the Dec quarter, work out your half-yearly income and adjust the PAYGI, paying or varying what is necesary taking the 1st quarter into account

if the quarterly tax payable you calculate is less than the instalment amount on your form, vary the amount on the form to the amount you calculate

if the quarterly tax payable you calculate is more than the instalment amount on your form, simply pay the amount on the form

WARNING: if you vary your PAYGI and under-estimate your PAYGI payable you can be penalised

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51. Taxpayers can reduce a PAYG or GST instalment liability by varying the instalment rate or amount. Where a variation of the PAYG instalment rate results in an amount less than 85% of the assessed income tax payable for the year, the taxpayer is liable to pay a penalty.

http://law.ato.gov.au/atolaw/view.htm?docid=PSR/PS20028/NAT/ATO/00001