The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

12 December 2008


Joint Media Release
The Minister for Small Business, Independent Contractors and the Service Economy

Reduction of the Quarterly Pay-As-You-Go Instalment Due in February 2009 for Small Businesses

Today we are pleased to announce the Rudd Government will take further action to help Australian small businesses to weather the global financial crisis by cutting the quarterly pay-as-you-go (PAYG) instalment payable on 21 January 2009 or 28 February 2009 by 20 per cent.

Small business is the backbone of our economy, and today's announcement by the Rudd Government will offer some much-needed relief to around 1.3 million small businesses - many of them doing it tough due to the global financial crisis.

This 20 per cent cut in the February instalment will more accurately reflect small businesses' average actual profit growth in the current economic environment. It will provide immediate and much-needed cash flow relief to small businesses and encourage small business confidence.

While there is a tolerance in the existing provisions that allows taxpayers to vary instalments down of their own accord, many small businesses are reluctant to do so, especially those with unpredictable income streams. This action by the Government will reduce uncertainty for those small business taxpayers and relieve them of the cost of doing their own calculations.

This 20 per cent reduction will be available to small business entities - generally those with aggregated turnover of $2 million per annum or less.

Details of the PAYG instalment reduction are attached.

The cost of the initiative is estimated to be $440 million for 2008-09. This consists of bringing forward the expected lower revenue collection from small businesses in 2009-10 caused by the current economic conditions. However there will be no net cost to the Commonwealth over the full forward estimates period.

Today's announcement - along with our $10.4 billion Economic Security Strategy to strengthen the economy, boost confidence and support jobs - shows the Rudd Government is determined to act decisively to bolster small business in the face of the global financial crisis.

12 December 2008


Who will receive the reduction?

The 20 per cent PAYG instalment reduction applies to 'small business entities' as defined in the tax law. In general a 'small business entity':

  • carries on a business;
  • and satisfies the $2 million aggregated turnover test.

How will it apply?

The 20 per cent reduction applies to the instalment amount shown on the Business Activity Statement (BAS) dispatched by the Australian Taxation Office (ATO) in December 2008 for the quarter ending on 31 December 2008. This instalment amount is due on or before 28 February 2009 (which will be extended to 2 March 2009 as 28 February 2009 falls on a weekend) for most small business taxpayers. For some small business taxpayers (for example, small businesses which elect to report and pay the goods and services tax on a monthly basis), this due date is 21 January 2009. As such, for the quarter ending 31 December 2008, small business entities are only required to pay 80 per cent of the instalment amount shown on the BAS on 21 January 2009 or 2 March 2009.

Small businesses can further vary their instalments based on the reduced amount in accordance with the existing law.

This reduction does not apply to taxpayers who calculate their instalments based on the instalment rate notified by the ATO. Their payments will automatically adjust when they apply the given rate to their actual income for the quarter.

Further information

Further information on this reduction can be obtained by contacting the ATO on 132 866.