PAYG instalments: How much tax do I have to pay?
ATO Calculation Vs. Own Calculation
The ATO gives you two options for determining how much to pay. 
1) Paying how much the ATO calculates for you which is shown on the activity statement
2) Work out your own instalment amount from your business and/or investment income
1) Paying how much the ATO calculates for you
The ATO makes an assumption that your business and/or investment income will grow every year at the same rate that the Australian economy grows. The ATO uses GDP as a measure of how the Australian economy grows.
The ATO will calculate the PAYG instalment amount based on the tax liability from your previous tax assessment and will adjust it by GDP growth.
The final figure the ATO calculates will be shown on the activity statement.
2) Work out your own PAYG instalment amount
The ATO can theorise all they like about how they think your business will grow. In reality your business or investment income will most likely grow at a rate different to the rate of the entire Australian economy.
The ATO will allow you to calculate your own instalment amount using what they term ‘the rate option’. This is because the ATO will provide you with an instalment rate on your activity statement that you use to calculate the instalment amount.
Instalment amount ($) = instalment income ($) x instalment rate (%)
Instalment income is your “gross business and/or investment income, excluding GST” 
What if my business and/or investment income changes for the quarter?
Some businesses experience big changes in taxable income each quarter. For example farmers often run seasonal crops and often receive most of their income in only quarter. It would not be fair for farmers to pay the tax liability in each quarter. To accommodate for this the ATO will allow you to submit a PAYG instalment variation form. The PAYG instalment variation form will allow you to specify the taxable income for the quarter and vary the tax liability.
PAYG instalment variation forms are supplied with the activity statement sent by the ATO each quarter.