Your business can be pulled into PAYG instalments without you applying. According to the ATO's "Starting PAYG instalments" page (last updated 17 December 2024, checked 1 October 2026), an individual or trust enters automatically when all three of these are true: instalment income from the latest tax return of $4,000 or more, tax payable on the latest notice of assessment of $1,000 or more, and estimated (notional) tax of $500 or more. Companies face a different set of tests, where meeting any one is enough.
Which set of tests applies to you?
The distinction is the structure you operate through. business.gov.au describes a sole trader as the simplest structure, giving you full control, while a company is a separate legal entity that limits your liability. A trust is one where a trustee is responsible for business operations.
That matters here because the ATO groups trusts with individuals for entry purposes, not with companies.
What are the three tests for sole traders and other individuals?
The three figures below all have to be met at the same time (ATO, "Starting PAYG instalments", last updated 17 December 2024, checked 1 October 2026):
| Test | Threshold | Where the figure comes from |
|---|---|---|
| Instalment income | $4,000 or more | Your latest tax return |
| Tax payable | $1,000 or more | Your latest notice of assessment |
| Estimated (notional) tax | $500 or more | Your estimate / notional tax |
Because they are cumulative, missing one keeps you out for that year. Crossing all three brings you in.
What puts a company into PAYG instalments?
A company enters automatically if any of the following apply (ATO, "Starting PAYG instalments", last updated 17 December 2024, checked 1 October 2026):
- instalment income from its latest tax return of $2 million or more;
- estimated (notional) tax of $500 or more;
- it is the parent of a consolidated group.
The same page notes that companies and super funds are covered by this list, so a corporate structure is not judged on the $4,000 / $1,000 / $500 combination that applies to individuals.
How the two entry routes compare
| Sole traders, individuals and trusts | Companies | |
|---|---|---|
| How the tests combine | All three must be met | Any one is enough |
| Instalment income test | $4,000 or more | $2 million or more |
| Tax payable test | $1,000 or more | Not part of the company list |
| Notional tax test | $500 or more | $500 or more |
| Additional test | — | Parent of a consolidated group |
All figures above: ATO, "Starting PAYG instalments", last updated 17 December 2024, checked 1 October 2026.
How often do instalments fall due?
Once you are in the system, instalments are usually paid every three months, per the same ATO page (last updated 17 December 2024, checked 1 October 2026). That quarterly rhythm is the practical change most operators notice first: tax moves from an annual bill to payments spread across the year.
What should you check on your own records?
Before your first quarter arrives, these are the three places the entry tests point to:
- Instalment income on your most recent tax return — compare it with the $4,000 threshold if you are a sole trader or trust, or the $2 million threshold if you operate through a company.
- Tax payable shown on your latest notice of assessment — relevant to the individual and trust route at $1,000 or more.
- Your estimated (notional) tax — the $500 test appears on both lists.
The ATO material we relied on sets out these entry tests; it does not set out how instalment income or notional tax are calculated step by step, and this article deliberately does not work an example, because the thresholds are the decision point, not the arithmetic.
FAQ
Do all three individual tests have to be met?
Yes. The ATO lists instalment income of $4,000 or more, tax payable of $1,000 or more and estimated (notional) tax of $500 or more as the combination that brings an individual or trust into the system (ATO, last updated 17 December 2024, checked 1 October 2026).
Does a company need to meet every test?
No. A company enters automatically if any one applies: instalment income of $2 million or more from its latest tax return, estimated (notional) tax of $500 or more, or being the parent of a consolidated group (ATO, last updated 17 December 2024, checked 1 October 2026).
Are trusts tested like individuals or like companies?
Like individuals. The ATO's entry conditions for instalment income of $4,000 or more, tax payable of $1,000 or more and notional tax of $500 or more apply to individuals, including sole traders, and to trusts (ATO, last updated 17 December 2024, checked 1 October 2026).
Can operating as a company change the entry test?
Yes, because the threshold itself changes. The income test for a company is instalment income of $2 million or more from its latest tax return, and the additional consolidated-group parent test only appears on the company list (ATO, last updated 17 December 2024, checked 1 October 2026).
How often are instalments paid once you are in?
Usually every three months, according to the ATO (last updated 17 December 2024, checked 1 October 2026).