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Australia: The time to pay your corporate tax is changing

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Companies must prepare for changes to the corporate tax payment deadline in Australia because of government reforms.

The move aims to align the payment of corporate tax by large companies with their GST payments.

The government said, in an announcement on October 22, the total tax paid by companies will stay the same but, from January 1 2014, companies with revenue of more than A$1 billion ($1.04 billion) (about 350 companies) will have to make their Pay As You Go (PAYG) corporate tax payments every month instead of every quarter.

Companies with turnover of $100 million or more (about 2500 in total) will do the same from January 1 2015 and around 10,500 companies, those with turnover of $20 million or more, will have another year after that to prepare before they start paying monthly from January 1 2016.

“This reform will make the tax system more responsive, efficient, and consistent by better matching tax collections with the economic conditions faced by business,” said Wayne Swan, Australia’s Deputy Prime Minister and Treasurer, and David Bradbury, the Minister Assisting for Deregulation. “Affected companies will pay smaller tax instalments immediately following months when business is down, and larger instalments when business is strong. It will also align company tax instalments with GST payments to streamline companies' payment cycles.”

Streamlining

The streamlining will occur because most companies have to pay their income tax in four quarterly PAYG company tax instalments, but most large companies are generally required to pay GST in monthly payments.

“This change continues the reform of the company tax instalment system that began in the late 1980s and complements other initiatives the government has announced to address timing disparities in the tax system, such as loss carry-back, which allows businesses to use losses more flexibly, as well as more timely access to the Research and Development Refundable Tax Offset,” the announcement added.

The government said it would be happy to discuss other reforms to the calculation of PAYG instalments to avoid overpayment or underpayment. It said it wanted to make sure that sums paid during the year are as close as possible to the final tax liability.

A consultation paper will be released in early 2013.

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