The Morrison Government will legislate to suspend the indexation of tax instalment amounts for the 2020-21 financial year in response to COVID-19.
This change will affect instalments payable to the Australian Taxation Office (ATO) for an estimated 2.2 million taxpayers paying Pay As You Go (PAYG) income tax instalments, and around 81,000 taxpayers paying Goods and Services Tax (GST) instalments in 2020-21.
The decision to suspend the indexation of tax instalments is yet another tangible way the Morrison Government is supporting Australians as we respond to the COVID-19 health crisis.
Tax instalments help spread taxpayer obligations over the year and to reduce a taxpayers’ balance on assessment.
Historical Gross Domestic Product outcomes are normally used to index a range of instalment amounts annually to reflect anticipated income growth.
Given the economic impact of COVID-19, the Government has decided to suspend this indexation for 2020-21.
In addition to suspending indexation, taxpayers can still vary their instalment amounts if they believe they will pay too much tax for the year.
Other taxpayers who pay instalments based on their current income are not subject to indexation because their instalments already adjust to changes in income. While these taxpayers are not affected by the suspension of indexation, they have the same right to vary their instalments.
Taxpayers who do not pay GST by instalments are unaffected.
It you require urgent assistance with your tax affairs due to COVID-19 you should contact the ATO’s Emergency Support Infoline 1800 806 218.