Something that often causes confusion with taxpayers are the accounts that the ATO maintain in each taxpayer’s name. There are sometimes more than two, but for the moment we will cover the two most common.
Integrated Client Account (ICA): This account is active if you receive a BAS or IAS and is a kind of dump account for all the obligations that you have in regard to your BAS. If you are registered for GST, PAYG Withholding and are asked to pay PAYG instalments, then all three components are debited to this account and your payments are credited against them.
Taxation Account: This account is active if you have ever lodged a tax return in Australia. It holds each year’s income tax result (whether refund or payment) and credits any payments made to clear outstanding amounts. If you have paid PAYG instalments, these are credited across at the same time as lodgement.
What catches a lot of people is why they are having to pay two different accounts. If you have not made all of the payments to the ICA account and part of your obligation was PAYG Instalments, the ATO will still credit the instalments to the Taxation Account despite you not paying them. The result of this is that you still need to pay the ICA account. If there is still an amount payable even after the PAYG Instalments are credited then that residual amount will be payable on the Taxation Account.
If there is a credit in either the Taxation Account or the ICA, the ATO will transfer any credit against any existing payment liability.
And remember, if you are operating as a partnership then the partnership will have an ICA account which will deal with GST and/or PAYG Withholding but each partner will have their own Tax Account in their own name (a partnership doesn’t pay income tax, only the partners do).
Article by Alan Lewis
Alan is the Principal at Alan Lewis Accountants. Alan is excited by tax strategies and small business growth. He loves interacting with clients and getting to really know and understand their needs. You can contact Alan directly at alan@lewistaxation.com.au.
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