IAS

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IAS (Instalment Activity Statement) is a reporting document used in Australia by businesses and individuals who pay income tax and other taxes in instalments.

What taxes do you report in the IAS?

Depending on your specific obligations and business structure, the IAS can encompass various taxes, such as:

  • Income Tax Instalments: On the IAS, you will report payments made towards your expected tax liability for the current financial year. The tax authorities calculate the required amount based on your income and includes it in your IAS.
  • PAYG Instalments: You make these payments to employees, contractors, and other businesses, including ABN withholding. If you need to withhold PAYG, you report and pay these amounts on your IAS.
  • Fringe Benefit Tax Instalments (FBT): If your business provides non-cash benefits to employees and their families, you may need to report and pay FBT using the IAS.

Determining if you need to lodge an IAS

As an individual or business in Australia, you may need to lodge an IAS if:

  • You are a Business Owner: If you operate as a sole trader, partnership, company, trust, or superannuation fund and have a tax obligation based on your income, you will need to lodge an IAS.
  • You Receive Income Not Subject to Withholding Tax: If you have income from investments, rental property, or business activities that is not subject to withholding tax, you are required to pay a PAYG instalment on that income.
  • You Are a Self-Funded Retiree: If your income is subject to instalment deductions due to being a self-funded retiree, you must lodge an IAS.
A man sitting on the couch and looking at some documents.

Choosing your instalment payment and calculating your income for IAS

To pay your Instalment Activity Statement (IAS), you have two options for calculating how much to pay each term.

The tax authorities offer a predetermined rate, and it’s the simplest option to pay the rate they calculate for you. Nevertheless, if you aim to save money over the long term, you may consider spending more time calculating your own rate for the IAS form.

Take the following factors into account when calculating your own rate

  • Consider changes in investments.
  • Account for changes in legislation or product mix.
  • Factor in consolidations.
  • Account for any changes in your business structure.
  • Stay updated on financial market changes.
  • Consider internal business restructures.
  • Account for significant changes in trading conditions.
  • Consider the use of income tax losses.

Ensure you provide reasons for your result when calculating your rate.

Calculating your income

It is essential to know what counts as income and what doesn’t count. Do not include any amounts that are already considered as part of your GST. Your business income for instalment payments includes:

  • Include all income from a foreign source.
  • Take into account any foreign pensions that Australia can assess as income.
  • Include income from trusts or partnerships.
  • Account for interest earned on an account.
  • Include dividends you either received or reinvested (excluding imputation credits).
  • Consider gross rent, sales, and fees for services.
  • Account for farm management withdrawals (any farm management deposits reduce your income for the current instalment period).
  • Consider income you earn from selling a product or service.
  • Include JobKeeper payments.
  • Take into account royalties.
  • Super funds or self-managed super funds are required to declare net capital gains or net losses.
  • Account for tax credits for fuel.

Do not include these items when calculating your instalment income

  • Exclude any dividend amounts that fall under specific provisions of Australia’s income tax laws.
  • Exclude any exempt income like family tax benefit payments and child care benefit payments.
  • Do not include any payments or income provided to the National Rental Affordability Scheme.
  • Exclude capital gains with the exception of superannuation funds and self-managed super funds.
  • Do not include franking credits that appear on your dividend statement.
  • Exclude grants that fall under the energy grants credits scheme.
  • Do not account for GST amounts.
  • Do not include income attributed to salary and wages if the amounts were withheld or should be withheld when following the PAYG system.
  • Exclude luxury car tax (LCT) that you charge.
  • Do not account for wine equalisation tax (WET) that you charge.

Calculating your total tax owed

After computing your income and determining the rate, combine these two figures to calculate the total amount owed for the IAS period.

It’s important to get an accurate income amount and rate, as wrong calculations in your favor may result in credits for the annual period.

Nevertheless, if you pay too little in taxes, it may lead to higher costs in future periods once the ATO processes your IAS.

This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.