If you're an Uber driver in Australia, you've probably heard about PAYG instalments after lodging your first tax return. Many drivers are surprised when they receive a letter from the Australian Taxation Office (ATO) asking them to start making quarterly tax payments.
Don't panic, this doesn't mean you're paying extra tax.
PAYG instalments simply spread your estimated annual income tax across the year instead of requiring one large payment after lodging your tax return.
In this guide, we'll explain how PAYG instalments work for Uber drivers, who needs to pay them, how they're calculated, and how to keep your instalments accurate.
What are PAYG Instalments?
PAYG (Pay As You Go) instalments are prepayments towards your annual income tax bill.
Instead of paying your entire tax bill after lodging your tax return, the ATO may ask you to pay tax throughout the financial year in quarterly instalments. At tax time, these instalments are credited against your final tax liability.
Unlike employees, Uber does not withhold tax from your earnings. As an independent contractor, you're responsible for paying your own income tax and GST obligations.
Why Do Uber Drivers Receive PAYG Instalments?
Many new Uber drivers complete their first tax return and receive a sizeable tax bill. If your previous year's return meets the ATO's eligibility criteria, the ATO may automatically enrol you in the PAYG instalment system for the following financial year.
This helps you:
Avoid one large tax payment at the end of the year
Manage cash flow more effectively
Spread tax payments across four quarters
Who Has to Pay PAYG Instalments?
You generally don't choose to join PAYG instalments. The ATO determines whether you should enter the system based on factors such as:
Your taxable business income
The amount of tax you owed in your previous return
Your expected tax liability
If you're required to make PAYG instalments, the ATO will notify you.
Are PAYG Instalments the Same as GST?
No. This is one of the biggest misconceptions among new Uber drivers.
PAYG Instalments
Prepayment of income tax
Based on estimated taxable profit
Credited against your annual tax return
GST
Tax collected on rides
Based on GST collected and GST credits
Reported on your BAS
Uber drivers generally need to register for GST from their first dollar of rideshare income because ride-sourcing is treated as a taxi service for GST purposes.
When Do Uber Drivers Pay PAYG Instalments?
Most Uber drivers pay PAYG instalments quarterly. If you're registered for GST (which most Uber drivers are), your PAYG instalments are usually reported and paid as part of your Business Activity Statement (BAS).
The ATO publishes the official lodgement and payment due dates each year.
How Does the ATO Calculate PAYG Instalments?
The ATO generally uses information from your previous tax return to estimate how much income tax you'll owe during the current year.
You may be asked to:
Pay a fixed instalment amount, or
Calculate your instalment using an instalment rate applied to your income.
The method shown on your BAS or Instalment Activity Statement (IAS) determines which approach applies.
Can You Reduce Your PAYG Instalments?
Yes. If your income is significantly lower than the ATO's estimate—for example:
You stopped driving Uber
You switched to part-time
Your earnings have fallen
Your deductible expenses increased
you may be able to vary your PAYG instalments.
However, if you reduce them too much and your estimate proves incorrect, the ATO may charge interest or penalties on the shortfall. Only vary your instalments when you have a reasonable basis for doing so.
What Happens at Tax Time?
PAYG instalments are not additional tax. When you lodge your annual tax return:
Your actual taxable income is calculated.
Your final tax liability is determined.
All PAYG instalments you've already paid are credited against that amount.
Possible outcomes include:
You receive a refund if you've paid too much.
You pay the remaining balance if you've paid too little.
Why Accurate Bookkeeping Matters
Many Uber drivers struggle with PAYG because they don't know their actual profit until tax time.
Without accurate records, it's difficult to know whether:
your instalments are reasonable,
your business is profitable,
or whether you should vary your PAYG amount.
Keeping your bookkeeping up to date throughout the year makes PAYG much easier to manage.
Simplify PAYG with Accounting Samurai
Instead of manually calculating your income and expenses every quarter, let Accounting Samurai do the heavy lifting.
Our AI-powered Profit & Loss Statement Generator helps Uber drivers:
Upload bank and card statements
Automatically categorise income and expenses
Generate professional Profit & Loss statements in minutes
Monitor taxable profit throughout the year
Prepare for BAS, PAYG instalments, and annual tax returns
Share accountant-ready reports whenever needed
By knowing your real profit each quarter, you'll have a much better understanding of whether your PAYG instalments accurately reflect your business.
🚀 Stop Guessing Your Quarterly Profit
Know exactly how your Uber business is performing before your next BAS or PAYG instalment.
Upload your bank statements and let Accounting Samurai automatically generate a professional Profit & Loss statement in minutes.
👉 Generate Your Profit & Loss Statement
Frequently Asked Questions
Do Uber drivers have to pay PAYG instalments?
Not automatically. The ATO decides whether you're required to enter the PAYG instalment system based on your previous tax returns and estimated tax liability.
Are PAYG instalments the same as BAS?
No. BAS reports GST and may also include PAYG instalments if you're registered for GST. PAYG instalments themselves are prepayments of your annual income tax.
Can I vary my PAYG instalments?
Yes. If your income has decreased or your circumstances have changed, you can apply to vary your instalments. However, make sure your estimate is reasonable to avoid interest or penalties.
Do PAYG instalments mean I'll pay more tax?
No. They're simply advance payments toward your annual tax bill. Whatever you pay during the year is credited when you lodge your tax return.
Useful ATO Resources
For more information, see the official ATO guidance:
These resources explain how PAYG instalments, GST, and income tax apply to Uber and other rideshare drivers in Australia.
