What Businesses Need to Know
From 1 July 2026, the GDP adjustment factor used to calculate PAYG (Pay As You Go) and GST instalment obligations will rise to 5%. (softwaredevelopers.ato.gov.au) This affects instalments for quarterly periods, particularly for those whose accounting periods start after 31 March 2026. Entities with substituted accounting periods beginning 1 January, 1 February or 1 March 2026 will retain the previous 4% adjustment for that income year. (softwaredevelopers.ato.gov.au)
Practical Compliance Steps
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Update accounting and tax software:
- Ensure your tax preparation tools are set with the new 5% GDP uplift for instalment calculations if relevant.
- If your software allows multiple accounting periods, verify which period applies to your business.
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Forecast cash flows:
- An increased instalment factor means instalment payments may increase — plan cash flows accordingly.
- Consider smoothing instalments if revenue is seasonal.
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Check accounting period start dates:
- If you operate under a substituted accounting period starting on 1 January–March 2026, you’ll maintain 4% for that period. If your accounting period starts from 1 April 2026, you’ll need to apply 5%. Falling on the cusp requires accurate tracking.
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Review GST instalment schedules:
- Businesses that pay GST via instalments will see changed instalment amounts — review thresholds and timing with suppliers and cash position.
Example of Impact
SmallCo Pty Ltd, a retail business, has a financial year from 1 April 2026 – 31 March 2027. From 1 July 2026, SmallCo calculates its PAYG instalments using the 5% uplift on notional tax; this increases quarterly payments, meaning budgets must be adjusted. If instead SmallCo had an accounting period starting 1 February 2026, for that year they still use the 4% factor, but must switch to 5% for subsequent years.
Key takeaway: these instalment adjustments may seem technical, but incorrectly applying them can lead to underpayments or penalties. Businesses should update systems, forecast carefully, and consult tax advisors if needed.