To assist self-managed super funds (SMSFs) who continue to be affected by COVID-19, the ATO said it would not apply penalties or interest on varied instalments for the 2021-22 income year for excessive variations when you have taken reasonable care to estimate your end of year tax.
SMSFs can vary PAYG instalments throughout the year if the fund thinks it will pay too much, compared with the estimated tax for the year.
“This means making a reasonable and genuine attempt to determine your liability,” the ATO said.
“When considering if a genuine attempt has been made, we take into account what a reasonable person would have done in your circumstances. Variations do not carry over into the new income year.
“If you made variations in the 2020-21 income year, you may need to vary again in 2021-22. Your varied amount or rate will apply for all of your remaining instalments for the income year, or until you make another variation.”
The ATO encouraged SMSFs to review their tax position regularly and vary PAYG instalments as the situation changes.
“By making regular payments (instalments) throughout the year, you will not have to pay a large tax bill when you lodge your tax return,” the ATO explained.
“If you realise you have made a mistake working out your PAYG instalment, you can correct it by lodging a revised activity statement or varying a subsequent instalment.
“If you are unable to pay your instalment amount, you should still lodge your instalment notice and discuss a payment arrangement with us to ensure you will not have a debt at the end of the year. Remember, registered tax agents and BAS agents can help you with your tax.”
This will also apply to 30 June ordinary balancers for the 2022 income year and entities that have been granted a substituted accounting period (SAP). For an entity with a SAP, the ATO said any variation must relate to instalments made during the 2022 income year.
“You can vary your instalments multiple times throughout the year. Your varied amount or rate will apply for all your remaining instalments for the income year or until you make another variation,” the ATO said.
“You should ensure the total of your instalments for the income year are as close as possible to your tax liability for that year and paid proportionally across the year.”
