The Other October Tax Date: Your First PAYG Instalment Is Due 28 October
Lodged your 2025-26 return and copped a bill? The ATO may have put you on PAYG instalments, with the first due 28 October 2026. Here's what to do about it.
Most people have one date circled in October: the 31st, the deadline for lodging your own tax return. But there's a second October date that catches thousands of people completely off guard, and it lands three days earlier.
If you lodged your 2025-26 return back in July or August and it produced a bill instead of a refund, there's a decent chance the Australian Taxation Office (ATO) has quietly signed you up for something called PAYG instalments. The first payment is due Wednesday 28 October 2026.
It isn't a penalty, it isn't extra tax, and you have far more control over it than most people realise. Here's the whole thing in plain English.
What PAYG instalments actually are
You already know PAYG (pay as you go) withholding: it's the tax your employer takes out of every pay before the money hits your account. By the time you lodge your return, most of your tax is already paid.
PAYG instalments are the same idea, applied to income nobody withholds tax from. A weekend side hustle. Freelance or contracting work. Rent from an investment property. Share dividends. Even bank interest, if there's enough of it.
Rather than letting a year's worth of tax on that income pile up into one nasty lump after you lodge, the ATO asks you to pay it in quarterly chunks as you go. That's the entire mechanism.
This is not an extra tax
Every instalment you pay is credited against your final tax bill when you lodge next year's return. It changes when you pay, not how much. Pay in more than you end up owing and the difference comes back as a refund.
Why you're suddenly in the system
Nobody asks your permission. Entry is automatic: the ATO processes your return, runs three tests, and if you fail all three you're in. You find out when the notice turns up.
For individuals and sole traders, the three tests are:
- Your business and investment income (the ATO calls it instalment income) on your latest return was $4,000 or more
- The tax payable on your latest notice of assessment was $1,000 or more
- Your estimated tax for the current year, known as notional tax, is $500 or more
Note what does not count: your salary or wages. Tax is already withheld on those, so they sit outside the instalment income figure entirely. It's the untaxed stuff that pushes you over the line.
Once you're in, the ATO sends an activity statement or an instalment notice. For most individuals it lands in the myGov inbox linked to ATO online services, or goes to your registered tax agent. It is not a request for permission, and it is not junk mail.
Worked example: how Sam ended up with a $2,000 quarterly bill
Sam earned $90,000 in salary during 2025-26 with tax withheld normally, plus $25,000 of net profit from weekend freelance work with nothing withheld at all.
Sam's taxable income was $115,000. Using the 2025-26 rates, that's $4,288 of tax on the first $45,000, plus 30% of the $70,000 above it ($21,000), for $25,288 — then the 2% Medicare levy on $115,000 adds $2,300. Total tax for the year: $27,588.
Across the year Sam's employer withheld roughly $19,588, because it was withholding against a $90,000 salary and knew nothing about the freelancing. So Sam's notice of assessment showed a bill of about $8,000.
That trips all three tests at once: $25,000 of instalment income, an $8,000 bill, and estimated tax well above $500. Sam is now a quarterly instalment payer. The ATO works out an instalment from that same return — roughly $2,000 a quarter — and the first one is due 28 October 2026.
Sam is not paying $8,000 twice. The $8,000 settles 2025-26 and is done. The $2,000 a quarter is a down payment on 2026-27, and every cent of it comes off the bill Sam would otherwise face in full next year.
The trap: two bills land in the same year
The year you enter the system is the brutal one. You settle last year's tax bill and start prepaying this year's at the same time. It's a timing shift rather than double tax, but it wrecks a budget that wasn't expecting it — so plan for both.
The two ways it can be worked out
On your first activity statement of the income year you may get a choice between two methods, and the right one depends entirely on how steady your side income is.
- Option 1, the instalment amount: the ATO hands you a dollar figure and you pay it. Zero maths. But it's built from last year's return, so if your side income has dropped, you're prepaying tax on money you aren't earning.
- Option 2, the instalment rate: the ATO hands you a percentage and you apply it to the income you actually earned that quarter. More work each time, but it rises and falls with your real income automatically, so a quiet quarter costs you less without any paperwork.
If your freelance work or rental income is lumpy and unpredictable, Option 2 usually saves you the hassle of constantly varying a fixed amount that never quite fits.
You can change the number — but do it properly
If the ATO's figure is clearly wrong because your circumstances changed (you sold the rental, the contract ended, the side hustle stopped), you can vary the instalment down. The catch is timing: you have to vary on or before the due date of the instalment you're varying. You can't retrospectively fix one you've already paid.
There's also a guard rail, and it has teeth. If your varied instalments for the year add up to less than 85% of the tax you actually end up owing on that income, the ATO can charge general interest charge (GIC) on the shortfall — backdated to each instalment's original due date.
GIC ran at 11.43% a year for the July-September 2026 quarter, it's calculated daily and compounds, the rate is reset every quarter, and since 1 July 2025 you can no longer claim it as a tax deduction. So it costs full freight.
The good news: the ATO does not apply interest or penalties where you took reasonable care — meaning you made a genuine, evidence-based estimate of what you'd owe. Working off actual quarterly figures is reasonable care. Picking a low number because cash is tight is not.
Varying down is not the same as not paying
Ignoring the notice doesn't pause anything. The amount stays payable and GIC starts running from the due date. If the figure is genuinely too high, lodge a variation with a realistic number — don't simply skip the payment.
Getting out of the system
If the income has genuinely stopped, you don't have to stay in forever. The ATO removes you automatically when your next return reports less than $4,000 of business and investment income, or when your assessment shows a tax debt under $1,000 after adjusting for instalments and voluntary payments.
Don't want to wait for the annual review? You can request an exit yourself through myGov linked to ATO online services (Tax, then Manage, then Tax registrations, then Cancel), through your registered tax agent, or by phoning the ATO on 13 28 61. The option only appears once you actually meet the exit criteria, so if it's greyed out, you're not eligible yet.
Your October checklist
Five minutes now saves a surprise later:
- Check your myGov inbox for an activity statement or instalment notice — that's where your amount or rate lives.
- Quarterly payer? Quarter 1 (July to September) is due 28 October 2026, then 28 February, 28 April and 28 July 2027.
- Paying annually instead — notional tax under $8,000 and not registered for GST? Your 2025-26 annual instalment is due 21 October 2026.
- Side income much lower this year? Look at switching to Option 2, or vary the amount before the due date using real figures.
- Side income gone altogether? Check whether you're eligible to exit rather than prepaying tax on income you no longer have.
- And don't lose the other date: if you lodge your own return, your 2025-26 return is still due 31 October 2026.
FAQ
Are PAYG instalments an extra tax on top of what I already owe?
No. Every instalment is credited against your final tax liability when you lodge. It only changes the timing of your payments, not the total amount of tax you pay. If your instalments add up to more than you end up owing, the excess comes back to you as a refund.
Why did the ATO put me into PAYG instalments without asking?
Entry is automatic once your assessment meets all three tests: business and investment income of $4,000 or more on your latest return, tax payable of $1,000 or more on your latest notice of assessment, and estimated (notional) tax of $500 or more. You aren't asked to opt in — you're notified with an activity statement or instalment notice.
What happens if I just don't pay the 28 October instalment?
The amount stays payable and general interest charge starts accruing daily from the due date. GIC was 11.43% a year for the July-September 2026 quarter, it compounds, and since 1 July 2025 it is no longer tax deductible. If the instalment is genuinely too high, lodge a variation before the due date instead of skipping it.
Does my salary count towards my PAYG instalments?
No. Instalment income covers business and investment income — freelance and contracting work, rent, dividends, interest and trust distributions. Wages and salary already have tax withheld by your employer, so they're excluded from the instalment income figure.
Run your own numbers