- Waiting for the ATO to Enrol You
Many sole traders think PAYG is automatic, but you don’t need to wait. Voluntarily opting in can prevent a nasty surprise at tax time.
- Choosing the Wrong Instalment Method
If your income is unpredictable, the fixed amount method could leave you short. Instead, use the instalment rate method so your payments reflect actual earnings.
- Not Adjusting Instalments When Income Changes
Your income won’t always stay the same. If business slows, or booms, update your instalments. This avoids both overpaying and underpaying.
- Missing Instalment Deadlines
Late payments mean interest and possible penalties. Use reminders or accounting software to keep on top of due dates.
- Errors on the BAS
PAYG is often reported through your BAS. Mistakes here can cause compliance issues, so always double-check before lodging.
- Ignoring Contractor Withholding Rules
If a contractor doesn’t provide an ABN, you must withhold 47% of their payment. Missing this obligation is a common mistake.
- Poor Bookkeeping
Without up-to-date records, PAYG instalments can easily go wrong. A cloud accounting system or bookkeeper can save you from errors.
- Forgetting PAYG Withholding When Hiring Staff
As soon as you employ workers, you must also register for PAYG withholding and deduct tax from wages, separate from your own instalments. 👉 Learn more at business.gov.au.
Bonus Tip: Combine PAYG Instalments With Strong Cash Flow Practices
Managing PAYG becomes much easier when paired with a cash flow strategy. Consider setting aside tax funds in a separate bank account to avoid spending money that’s already owed.
By avoiding these common PAYG mistakes, sole traders can reduce stress, stay compliant, and protect their cash flow.
👉 Unsure if you’re on the right track? Book a free 30-minute consultation with Business Genie to review your PAYG process and avoid costly slip-ups.
