Government to suspend indexation of tax instalments
The government has announced it is suspending PAYG indexation amounts for the 2020–21 financial year to ease the pressure of the coronavirus crisis on taxpayers.
Assistant Treasurer Michael Sukkar has confirmed the 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 PAYG income tax instalments, and around 81,000 taxpayers paying goods and services tax (GST) instalments in 2020-21.
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," Mr Sukkar said.
In addition to suspending indexation, taxpayers will still be able to 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," added Mr Sukkar.
"While these taxpayers are not affected by the suspension of indexation, they have the same right to vary their instalments."