Before you lodge your tax return, it’s sometimes useful to know how much tax has already been paid to the ATO on your behalf by employers and payers.
This is especially true if you’re a sole trader, because you’ll need to take this information into account when calculating how much to set aside for any further tax you may owe.
So how do you know how much tax you’ve already paid? Through a PAYG Payment Summary, of course.
What is a PAYG Payment Summary?
So glad you asked. A PAYG Payment Summary, or an Income Statement, or a Group Certificate if you’re old school, is a physical or digital document summarising how much you’ve earned, and how much tax has been withheld from your income, over the past financial year as an employee of a company.
Employers used to be required to prepare and send PAYG Summaries to each of their employees at the end of the financial year. But now that Australia has moved to a Single Touch Payroll system, employers are no longer required to do so. Instead, individuals can access their PAYG Payments Summary through their myGov account – but more on this in a bit.
Why might you need a PAYG Payment Summary?
If you’re a sole trader who also has employment income, you’ll need a PAYG Payment Summary to see how much tax has been paid on your behalf on that income, so you can ballpark how much tax you still need to set aside from your self-employed income. Phew!
In general, your PAYG Withholding tax includes the tax-free threshold, meaning that the effective tax rate on your self-employed income will be much higher than your overall effective tax rate.
Failing to take this into account may mean you don’t set aside enough tax to cover your final tax bill!
📖 Confused by that last bit? Plug your numbers into our Australian sole trader tax calculator and play with the numbers to see what happens to your effective tax rate!
How to find your PAYG Payment Summary
Alright, so, first thing’s first – you’ll need to set up your myGov account.
If you already have one of these, brilliant! Time to log in.
From there, you’ll be able to find the previous financial year’s PAYG Payments Summary by:
- Heading to the relevant ATO page under “linked services”
- Clicking “View my income statements”
- Your PAYG Payment Summary from the most recent financial year, as well as the current financial year, should be visible.
It’s important to note that unless your PAYG Payment Summary is marked “Tax ready”, it’s not finalised, and you shouldn’t then lodge your tax return. The information may not be accurate, and you’ll have to amend your tax return if your employer updates your details.
Hnry does it all for you
If all of this sounds like a bit much, you’re more than welcome to join Hnry (hi, that’s us). Hnry is an award-winning app and accounting service for sole traders that automatically calculates, deducts, and pays taxes for your sole trader income throughout the financial year. We do all the maths for you, so you don’t need to worry about any of this, we promise.
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