The quantum and timing of pay as you go (PAYG) instalments becomes important to avert a potential franking deficit at year end and the application of the 30 percent reduction in offset penalty where franking deficits tax is paid.
To deal with this, some companies have contemplated an upward variation to the 3rd quarter, or alternatively, a variation to the 4th quarter with payment on or before 30 June. However, Australian Taxation Office (ATO) ID 2004/836 does not confirm that a franking credit can arise on 30 June. The latest ATO technical view is that no franking credit arises until 1 July or after.
Given this, an upward variation to the 3rd quarter (or earlier quarter) which is supported by a robust tax payable projection and payment of the instalment before 30 June should be effective.
A variation can still be made even after 21 April through a revision mechanism allowed by the ATO but GIC will be payable.
A revision is allowed until the time the ATO generates the 4th quarter activity statement in its own system (typically generated in late May / early June). After this time, the ATO system will not allow a revision through the business or tax agent portals.
The ATO has accepted our submission to make a manual adjustment to the 3rd quarter activity statement in early June. Clearly early action is preferred.
This is equally relevant to SAP taxpayers. All taxpayers need to focus on likely year-end balances by the time the 3rd quarter is due, to avoid GIC.